China Merchants Bank Aktie

Dear investors, analysts, friends from the media, good morning. CMB 2025 Annual Result announcement will now begin. I am Head of the Office of the Board of Directors of China Merchants Bank, Xia Yangfang.

We have released the 2025 annual results last Friday. And this conference will be carried out both offline and online webcasting.

Now please allow me to introduce the attendee of today's on-site meeting. Sitting on the podium, they are Mr. Miao Jianmin, Chairman; Mr. Wang Liang, President; Mr. Peng Jiawen, Executive Vice President, CFO and Secretary of the Board of Directors; Mr. Xu Mingjie, Executive Vice President and Chief Risk Officer; Mr. Zhou Tianhong, Chief Information Officer.

Joining on-site and online, we also have Non-Executive Director, Mr. Zhu Liwei; Independent Director, Mr. Tian Hongqi, Mr. Li Chaoxian, Ms. Li Jian, Mr. Wong Yuk Shan, and Mr. Lu Liping, and also relevant Heads of Department of CMB.

On behalf of CMB, I would like to extend a warm welcome to your participation, and thank you for your long attention, support and investment in CMB.

Today's meeting will have 2 sessions. One, we will invite Mr. Miao, Mr. Wang to introduce the bank's 2025 result, which takes around 30 minutes. And the second part is the Q&A session, which takes around 1 hour and 30 minutes. The meeting will be provided with Chinese to English simultaneous interpretation.

Now we will have the floor to Chairman, Miao; and President Wang on CMB's 2025 performance.

Dear investors, analysts, friends from the media, good morning. Welcome to CMB's 2025 Annual Results Announcement. Today's results announcement will be introducing contents of 3 parts. First, I will introduce group's 2025 annual results. And then I'll give the floor to President Wang to introduce the operational information and then I will briefly introduce our outlook and strategy for the year 2026.

In 2025, we seek to quality, efficiency and scale, coordinated development and strive to build a world-class value creation bank and speed up our transformation towards the full initiative development and promote high-quality development, maintain good operations amid stability and strong resilience and innovation vitality, which was reflected in 5 parts.

First, we remain steady in terms of our operation, and we cope with the downward trend of the interest rate in sufficient demand and growth pressure. Our revenue and profit realized both dual growth ROAA and ROAE maintain a leading in the industry.

Net operating income RMB 337.2 billion, up by 0.05%. Net profit attributable to the bank's shareholder RMB 150.2 billion, up by 1.21%. ROAA, 1.19%; ROAE, 13.44%, down by 0.09 ppt and 1.05 ppt year-on-year.

Net interest income, RMB 215.6 billion, up by 2.04%. NIM was 1.87%, down by 11 bps year-on-year, with a narrower reduction and maintain a leading level in the industry, influenced by the fluctuation in the bond market. Non-interest net income, RMB 121.7 billion, down by 3.31% year-on-year, among which net fee and commission income increased by 4.39% year-on-year, which is recording the first positive growth since the year 2022. We seek to refine management and continue to promote reduction in cost and maintain a cost-to-income ratio of 32.01%.

Secondly, we maintained growth in asset and liability and maintain our advantages in low funding cost. Assets exceeding RMB 13 trillion; total loans and advances, RMB 7.26 trillion, up by 5.37%. General loan RMB 6.94 trillion, up by 6.57%. Total liability, RMB 11.79 trillion, up by 7.98%. Total customer deposit RMB 9.84 trillion, up by 8.13%. Demand deposits daily average balance account for 49.4% remain at a high level. Interest-bearing liabilities average cost ratio 1.26%, down by 38 bps year-on-year, and we maintain our advantages in low funding costs.

Thirdly, we consolidate our structural advantages and have strong capital strength. Non-interest income accounts for 36.08%, maintained leading in the industry. Net fee and commission income accounts for 61.85% of the total non-interest income. Retail finance makes over half of the contribution. Its net operating income and pretax profit account for 56% and 50% of the total.

And we also maintained quite good level of CAR under the advanced measurement approach. Core Tier 1 CAR, Tier 1 CAR and CAR were 14.16%, 16.51% and 18.27%, down by 0.7, 0.97 and 0.81 percentage points compared with the end of last year. Under the weighted approach, the core Tier 1 CAR, Tier 1 CAR and CAR were 11.92%, 13.9% and 15% down by 0.51, 0.73 and 0.73 percentage points compared with the end of last year. All levels of CAR's decrease was mainly influenced by the interim dividend payout and the reduction of OCI.

Fourth, asset quality remained stable and risk compensation capability remained to be robust. NPL balance, RMB 68.2 billion, up by RMB 2.6 billion. NPL ratio, 0.94%, down by 0.01 percentage point. Credit cost 0.6%, down by 0.05 percentage points. Allowance coverage ratio 391.79%, down by 20.19 percentage points. Loan loss reserve 3.68%, down by 0.24 percentage points, maintaining a high level of risk compensation capability.

Fifthly, we strive to build a digital and intelligent CMB and actively practice ESG philosophy. We focus on AI, increased IT input and talent reserve. In 2025, our IT input was RMB 12.9 billion, accounting for 4.31% of the bank's net operating income. R&D personnel exceeded 11,000 people accounting for over 9% of our total employees.

We have an open mindset and embrace cutting-edge technology rollout and implement application and strive to build up our AI systematic advantage. We construct a leading, intelligent, computing infrastructure, model performance and computation efficiency continue to increase. Our core computing rate, our token cost has reached an industry-leading level. Our average token throughput has increased by 10.1x compared with that of 2024. Our bank-wise large model developers exceed 10,000 people, and we continue to introduce the cutting-edge model and implement domain-specific model as many as 183. Our average iteration cycle significantly shortened as well. We deeply implement this technology into our business ecosystem and implement over 800 applications and realize both tech and business value.

We build our intelligent era, organizations and teams and construct talent pipeline that are cross functional. We promote deep integration of technology and business and build such intelligent organizational ecosystem. We incorporate ESG philosophy into the bank's development strategy and decision-making and promote sustainable development. We promote the development of green finance and enhance our green operation capability.

Green loan, green leasing balance grew by 21% and 23.89%. We assist enterprises to issue nearly 100 ESG bonds and raise their firms to support energy conservation, clean production, clean transportation and other industries. We attach great importance to green investment. Our companies and subsidiaries are holding more and more balance of green loans, green bonds and ESG products.

We continue to strengthen our green operation and deepen the carbon emission reduction and enhance our own carbon management refined level. We continue to enhance the quality and efficiency of serving real economy, tech, green, inclusive and manufacturing loan balance have taken up more and more proportion. And mentioned, MSCI ESG rating has received the highest level of AAA rating for 2 consecutive years. This is my brief overview of the 2025 result.

Now I'll give the floor to President Wang on the bank's operational information.

Thank you, Chairman Miao. Now I'll introduce the bank's 2025 operational information. The year 2025 is an extraordinary year facing multiple challenges under the leadership of the Board Directors, we have with good pressure, maintain determination and promote the international comprehensive, differentiated and intelligent transformation and maintain a good trend of operational results and our business are moving towards new and better direction and building up our own strength and competitiveness, which were mainly reflected in the following 5 parts.

We continue to consolidate our customer base and our business development are both directing towards good volume and quality. We remain customer-centric and strengthen high-quality customer acquisition and strive to build our -- build ourselves into clients' principal bank and first bank to approach.

Retail customers totaled 224 million, up by 6.7%, among which Golden Sunflower and above clients, 5.93 million, up by 13.29%. Customers holding wealth products amount to 64 million, up by 10.15%. For corporate customers, it was totaled 3.62 million, which was up by 14.4%, among which corporate customers newly acquired reached 657,000 serving tech clients as many as 350,000. And for corporate withholding customers, their amount was 1.53 million.

We also optimized category asset allocation. Total loans and advances account for 55% of the total asset. Retail loan accounts for 51% of the total loans and advances and investment assets accounts for 31.77% of the total assets. Interbank assets account for around 7.36%, down by 0.02 percentage points. Bill discounting account for 4.43%, down by 1.09 percentage points.

We continue to strengthen liability management and enhance the proportion of high-quality liability. Total deposits account for 83.43% of the liability, up by 0.12 percentage points. Core deposits daily average balance account for 87% of the total customer deposits daily average balance, up by 1.17 percentage points. Interbank deposits grew rapidly. Its demand deposit account for 93.77%. Customer deposit cost ratio 1.17%, down by 37 bps. Interbank deposit cost ratio, 1.02%, down by 29 bps.

Secondly, our 4 major segments are developing in a balanced and coordinated manner, and we are showing stronger development resilience. First, we secured a dominant position of retail finance and our leading advantage were further consolidated. Retail AUM balance exceeded RMB 17 trillion, up by 14.44%. Year-round increment reached RMB 2.16 trillion, hitting a record high. Retail customer deposits totaled RMB 4.5 trillion, up by 11%. Retail demand deposits, daily average balance accounts for 47% of the total. Retail loan, RMB 3.72 trillion, up by 2.07% market share growing steadily.

We strive to overcome adverse factors such as weak demand and consumption, our credit card business continued to grow in their market share. Active credit card users surpassed 70 million, developed against the trend. The transaction value was RMB 4.08 trillion, down by 7.62%. Credit card loan amounted to RMB 939.1 billion, down by 0.92%. The credit card transaction value and loan balance remain leading in the industry. And secondly, we speed up to build our characteristic in corporate finance and build up our strength in specialized segments. The FPA balance was RMB 6.73 trillion, up by 11.08%.

Corporate loan balance, RMB 3.22 trillion, up by 12.29%. We focus on modern industrial system. We prioritize our loan granting in tech, green, inclusive manufacturing and other industries and increase our competitiveness.

Corporate deposit balance RMB 5.34 trillion, up by 5.46%. Corporate deposits are accounting for 50% of the total. And retirement finance improve in both quality and efficiency. Annuity and trust surpassed RMB 300 billion pension fund under custody RMB 1.55 trillion. Private pension accounts exceeded RMB 15 million and contribution was among the top in the industry. Transaction banking focused on the trade finance and treasury management needs of the corporate customers. The number of customers using treasury management cloud further specialized.

Third, Investment Banking and Global Market business further specialize and innovate. FPA contributed by IB business grew by 10.38%. The bank, as lead underwriter that instrument was RMB 579.16 billion. Number of clients in GM business of client flow trading and transaction volume both grew. RMB bond investment transaction value grew by 1.96x. Bill discounting business grew by 12.89% ranking second in the market. Fourth, wealth management and asset management continue to expand.

We enhanced asset allocation capability grasp opportunities arising from the capital market and the wealth management business experienced robust growth. Three asset allocation clients was amounted to RMB 11.76 million, up by 13.31%. Retail wealth management product balance grew by 12%. Agency distribution of non-money market fund, trust scheme and premium -- insurance premium grew by 18.13%, 150.65% (sic) [ 155.65% ] and 25.93%. (sic) [ 25.96%. ]

Corporate wealth management product balance reached RMB 524.9 billion, up by 31.28%. Asset Management business totaled RMB 4.71 trillion, up by 5.13% as a custody scale, it ranks among the top in the industry, reaching RMB 26.09 trillion. Extensive wealth management income grew by 16.91%, top for the past 3 years and accounting for 52% of the total fee and commission income and increased by 5.78 percentage point.

Fifth, we speed up the business development in key regions and enhanced the contribution brought by the branches in these areas. We have 16 branches in key areas and their customer base, AUM, core deposits and other key indicators are having higher level of growth than the average level of other branches.

And retail AUMs proportion increased by 0.79 percentage points, and the corporate loan balance account as proportion was up by 0.12 percentage points. Third, for international and comprehensive development, we actively build up our new strength. We actively serve Chinese enterprises going global and resident needs of making global allocation of their assets enhance our service capability.

The overseas contributions are making more and more contribution. Their total asset grew by 12.88%, and the net operating income grew by 33.78%. Institutions in Hong Kong grasp opportunities and make good performance. Their total assets grew by 13.84%. Net operating income grew by 36%. Net income grew by -- net profit grew by 63% and CMB Wing Lung Bank's retail AUM grew by 22.14% for CMBI. The number of Hong Kong IPO underwritten and sponsored actually ranked #2 and #4 respectively.

For cross-border business, it shows strong momentum. Number of corporate customers in respect of international BOP exceeded 100,000 and the volume of international BOP grew by 12%. We deepened our comprehensive development and subsidiaries delivered various performing highlights. Their total asset was RMB 952.8 billion, up by 11%. Their operating income accounted for 12.26% of the group's total, up by 1.96 percentage points. Net profit, RMB 16.38 billion, up by 41%.

CMB leasing focused on new energy, new infrastructure, new tech, new mobility, and new intelligent manufacturing and new material, aka to 6 new industries to build their service mechanism. Their total asset was RMB 325.3 billion, up by 5%. CMB Wealth Management's product scale, RMB 2.64 trillion, up by 6.88%, maintained the top in the industry and equity-related products actually increased in their market share.

CMB Fund has managed a total scale of RMB 961.5 billion, up by 9.29%. CIGNA & CMAM insurance found under Fiduciary Management RMB 223.3 billion, up by 23%. CMB Investment commence operations, and we make new breakthrough in the layout of our comprehensive development.

Fourth, we upheld bottom line of risk and compliance, enhance risk management capability and have an even stronger solid foundation for development. We strictly classify assets and fully expose risks, actively resolve risk assets and maintain a good management of credit, market, operational liquidity and compliant risks and other type of risks. Our asset quality remains stable.

Special mention loan ratio 1.43%, up by 0.14 percentage points. Overdue loan ratio, 1.25% down by 0.08 percentage points. NPL to loans overdue for 60 days ratio was 1.18%. NPL formation ratio, 1.03%, down by 0.02 percentage point. As we are facing with the profound adjustment of the real estate market and rising individual risk, some mismatch in supply and demand in some industries, we seek to risk-oriented approach and dynamically adjust risk strategy and resolve risk in key indicators.

Corporate NPL ratio, 0.89%, down by 0.17 percentage points. Property NPL ratio 4.78%, down by 0.16 percentage points. Manufacturing NPL ratio, 0.43%, down by 0.06 percentage points. Retail NPL ratio 1.06%, up by 0.1 percentage point. Residential NPL ratio was -- residential mortgage NPL ratio 0.51%. Retail SME NPL ratio 1.22% and credit card loan NPL ratio, 1.74% and consumption loan NPL ratio, 1.02% all remain at a relatively low level in the industry. Fifth, we strengthen the management and innovation to promote a high-quality development and we have strong core momentum for future growth.

First, on one hand, we consolidate our foundation and conduct refined management. We consolidate our management to strengthen asset liability, forecast, operations, service and team management so as to guarantee our high-quality development. On the other hand, we continue to promote our innovation capability and maintain a leading technological capability.

We consolidate our technological foundation. The overall accessibility or availability of the cloud has surpassed 99.99%. We use hybrid deployment, elastic scaling and other technologies to increase the input/output ratio of cloud. Big data service has covered over 76% of the business personnel. We have been implemented large model in 4 business scenarios and saving 15.56 million men working hours and effectively enhance our efficiency.

We upgrade retail Xiao Zhao, intelligent service and construct AI Xiao Zhao service for the corporate clients. We speed up to build our AI organization. Over 98% of the personnel has already passed the preliminary level of competency certificates and adapt to the change of the technological risk condition in the AI era.

The above mentioned is the major operational information of the year 2025.

Now I'll give the floor to Chairman, Miao, on the 2026 outlook and operational strategy.

Now I will briefly introduce the company's outlook and strategy of 2026. Looking into 2026, for the banking industry, challenges and opportunities coexist. On the one hand, the external environment are exerting greater impact. And we see a pricing risk and in geopolitical condition, the world economy are sluggish, multilateralism, free trade are under severe threat. The new and growth driver continue to switch, and there are strong imbalance between supply and demand.

The market expectations tend to be weak, and the bank are continuing to face with the 3 lows: low interest rate, low interest spread and low fee rate, and they are taking pressures in their profitability. On the other hand, for Chinese economy, the supporting condition and the future condition has not changed, that the economy will continue to be developing in a good momentum, along with more proactive fiscal policies and monetary policies, we seek to make domestic demand in the dominant position, build up strong domestic market, and we believe that there will be more favorable factors for the operation of commercial bank.

In the year 2026, we will stick to our value creation bank strategy and continue to promote our 3 capabilities of wealth management, digital and intelligent technology and risk, expand our moat and explore a new layout of high-quality development.

Firstly, we will maintain our strategic determination and follow the developing principle of the banking industry focusing on high-quality tech self-reliance, strengthening the domestic market and high level of opening up and other key areas to seize opportunities and seize the customer need, strengthen the capability of innovation and promote professional differentiated, comprehensive financial service to clients and maximize our value that we can bring to customers, employees, shareholders, partners and the society.

Secondly, we will focus and sell through the cycle and maintain our competitive edge. In the low interest rate cycle, we will make sure that we will pay more attention to stabilizing the NIM and maintain industry-leading level. Secondly, we will build up our strength and make up for what we are not good at and strengthen our asset allocation capability, maintain our strength in wealth management business. Third, we pay special attention to the pricing and risk management of credit assets and maintain good asset quality. Fourth, we will promote the reasonable growth of RWA, optimize the capital allocation and maintain high level of CAR.

Thirdly, we will seize opportunity to speed up the transformation of the 4 initiatives and build up the new strength, speed up international development and promote overseas institutions to achieve high-quality development, build up our cross-border business and help enterprises going global, promote the comprehensive development of our subsidiaries and increase their contribution to the bank. So to build up our differentiated competitive edge, consolidate our systematic advantages in retail finance and speed up to form a new growth pool in key areas. And we will also speed up our digital and intelligent transformation, stick to AI-first philosophy and build up an intelligent bank, realize the model upgrade and construct our new mode in the new era of AI.

Fourth, we will build up our resilience to promote the balanced and coordinated development of the 4 business segments. We'll consolidate the dominant position of retail finance, build up our strengths in corporate finance and promote a stronger and better IB and Global Markets business and speed up the development of Wealth Management and Asset Management business and promote these 4 segments to promote each other and support each other in a higher level and construct a more resilient and competitive business development layout.

Fifthly, we will guard our bottom line to consolidate a fortress-style risk and compliance management system. We will stick to prudent and steady risk culture, enhance our capability to judge -- to understand the market, prevent credit risk, market risk, operational risk, liquidity risk and other risks and strengthen AML and internal control management to make sure that CMB could remain steady and resilient in the path of high-quality development.

Thank you.

Thank you, Chairman and President. Now we will enter into the Q&A session. We will have the questions from the investors and analysts first and then from the media. As we have many participants today, please follow the instruction given by the operator to raise your question, and please limit your question to 1 only. Please raise your name and the agency you represent before having the question.

Now we'll have the first question. [Operator Instructions] The first question, please, from this gentleman.

I'm Richard Xu from Morgan Stanley. And congratulations first for the brilliant results that you have achieved in 2025. And also you have achieved very good results in retail even within this very turbulent external environment. So my question is for the Chairman first. So this year is the start year of the 15th 5-year plan. And what is the plan or strategic vision or expectation from the Board to China Merchants Bank. And nowadays, we have seen very same very fierce competition among the banking sector. So against this backdrop, how can Board ensure the market-oriented mechanism of China Merchants Bank so as to expand its advantage -- competitive advantage?

Currently, I think the banking sector is still in a downward cycle. So banks are facing very down mounting challenge. And during the 15th 5-year plan, our requirement from the Board to China Merchants Bank is to stick to the high-quality development and accelerate innovation. It means the high-quality development and stay to the true course. It means to be professional to be market-oriented road. And this is a key to the high-quality development. And also, at the same time, need to have innovation so as to consolidate our strength and also to be differentiated from the peers, and also to accelerate the transformation so as to responding to the challenges, which has been brought out by the downward cycle of the market. And also, what we have seen is to be internationalized and to be more comprehensive operation and also digitalization intelligent banking and also to be differentiated from the peers. These are very 4 key elements of the banks.

In terms of internalization, we have achieved quite obvious results in the past 2 years. In terms of the comprehensive operating management, the subsidiaries of the banks are contributing more to the bank's operating income. So this is a very good advantage of CMB as well. And differentiated positioning is also CMB's advantage. From the Board, the business model for CMB will be, that we have advanced business model and also innovation driven and also to have the distinctive feature and also to be the first-class bank, which can create value for -- create value. So this is very important also the moat for CMB.

Finally, there will be the digitalization and an intelligent bank. In the past, we have been advanced and also better than peers in terms of technology. Now our -- we want to build up the first digitalization bank among the industry. And later on, we will have our Chief Information Officer, who can supply more. So, market-oriented mechanism is the backbone of CMB. And I think that the reforms of the remuneration system will not affect CMB's market-oriented system. So for CMB, the gene or internet is the corporate culture of CMB. So this is the moat of CMB.

And in the past, some of our analysts and also customers are expecting or thinking that different -- have CMB has different moats such as the low cost income -- low-cost funding source, some say that is the retail. But I think the very basic one of our moat is the customer-centric culture, and this has been our corporate culture and is the key our foundation of our business, because we are customer-centered and customers have good experience with the bank. That is why they want to bank with CMB, also deposit with CMB. And the deposit with CMB doesn't mean that they only want to put some money in CMB, but they want to do the financial trading and financial asset management with the CMB. That is why we have the lowest funding cost among the banks. We have the highest demand deposit ratio among the banking peers.

So the Board's requirement is to deepen reformation and accelerate internalization and also differentiation. And these are to be intelligent and to be comprehensive operation. So this is very important for CMB.

And then I would like to invite Mr. Zhou to supply more for the intelligent banking.

So for the past years, we -- one of the very key issue strategy for CMB is to have technology leading bank. And from last year, we also have made a plan for the next 5 years technology development. So -- and we have fully arrangement plan for the next 5 years.

And I think in the next 5 years, the key is to be technology-leading is one of our key strategy. And we all know that AI has been a very important trend. And from -- at the end of 2022, the Chairman has a requirement for CMB is to build ourselves into one of the first intelligent bank among the industry. So we have made quite a lot of efforts on that front.

Now in terms of large model, we have made quite good achievement in 2024. We have more explorations and have experience -- has gathered experiences. And Mr. Wang Liang put out the idea of the AI-first strategy, saying that among the whole bank to expand the application and also the mindset of the AI-first strategy.

So firstly, we have upgraded our organization and team, which are more applicable to the AI era. And especially large model is a very big breakthrough in the technology history. But it cannot substitute fully the human intelligent. And to some extent, it can be replaced. So we have a kind of analyze about what people are more good at and what AI models are better at and how AI can assist or to be separately work together with our human staff.

We have analyzed around 1,580 projects and to analyze how AI can assist on how AI can help with the work. And we have quantitative data on that and some are, say, high-value projects and some are mid-value and some are low value. So, for those high-value projects, which AI can assist more, then we will have more resources to put on. So 69% of them have been already implemented.

Altogether, there will be 856 projects that have been implemented or we can call it a scenario that have already been applied among the whole bank. And just now we have in the results announcement brief, the Chairman said we have already implemented this AI application in 856 scenarios. And now we are accelerating the place, so as to analyze and improve the important business procedures.

And secondly, I think that AI development is very -- have a very big difference to the traditional software engineer software. So it means that there will be high uncertainties where we are upgrading AI model.

So for CMB's experience that we think that 6x of upgrading before we can really put the large model into practice into real work or into real practice. So last year, we have made quite good results in the application of the large model. The upgrading period has been shortened to around 8 days of this model. So -- which means that it's faster for us to apply this large model.

And for 2025, so we have achieved quite results in 2024, which shows that for the large model application in CMB, the depth and the width of the application of AI has been expanded in a very fast manner. And I also would like to share with you why important data in this regard. In 2024, the daily throughput of the token is around 10.1x of what we have in 2024. So it's a very fast speed.

And daily average token throughput is RMB 25.6 billion. And in important areas, the AI large -- the application of the large model has already exerting -- have taken effect is serving around 10,000 Sunflower customers. And we have over 10,000 assistants for our Sunflower relationship manager and also for how our corporate manager help them to improve the customer recharge ratio by around 14%.

And and also for corporate credit loan business and also the AI model is also helping them before loan granting and during the loan lending and also after that, especially for micro loans, around 82% of the micro loan, loan submission and also credit approval is done by AI and large model. So -- and they also -- and also accelerated the approval process of the micro loans, which is 44% faster than what we have last year. And also in the past, for the -- how we can implement the credit approval, approval conclusion in the past that has been done by human beings by the human staff, but now it's assisted by the AI at large model and the system will kind of follow how the credit approval conclusion has been really implemented. And also, it has speed up of our early warning system that is also better than our human staff.

And I think the early warning is 42 days faster than what we have in the past. So which you can see that it's both helping us in all fronts, improving business development quality and also improving efficiency. In terms of improving efficiency that for the whole year, it has saved around 15.56 million human -- working hour, has saved that. So this is efficiency improvement of the efficiency.

But we all know that AI is improving or is kind of upgrading in a very fast manner, but there is illusion. There's forge that the models are doing. So banks are the area that is highly regulated and need very prudent risk management. So we are fully kind of alert to the illusion of the AI. So and controlling risk is a very important aspect of AI. So, very importantly, we need to be very prudent in developing AI models, which can be reliable and also we have achieved quite good results in 2025.

In 2026, I think we will move on and doing more efforts in this regard, better to implement our digitalization and intelligent banking strategy.

Thank you. The second question, please.

Yan Meizhi from UBS. First of all, congratulations on the very good results in 2025, especially against this very complex environment. And last year, our operating income and profit are both have recorded positive growth is very good. My question is, if we look into 2026 or even forward, how we can expect the growth rate of the operating income and the profit growth such as to be accelerated to around 3% to 5%? And also another question is about our ROE. I know, CMB's ROE has been higher than other banks. Last year, it's around 13.44%. The average banking level is around 9% to 10%. So in the past years, for the ROE side, we are seeing the ROE has been declining for CMB as well. So if we look ahead for the next 2 or 3 years, how will you expect the ROEs bottom? So will be the bottom be around 10% to 11%? So my question is for Mr. Wang -- Mr. Wang Liang. Thank you.

Thank you for your confirmation in our -- of our 2024 results. Before going into your question, I think this year is the 20th year when we first IPO-ed in H-share. We have financed around RMB 31.3 billion in our H-share market raised fast fund. And our total dividend payout is around 2.6x of the fund financing that we have got in the H-share market. And the total CAR ratio of the share pricing is around 15.07%.

So I think that even though there is volatilities of our share price, especially during the financial crisis, I think for long-term investors, I think you can make quite a good return from CMB and also we continue to be very firm in creating value for our customer and also to have the return for the investors. And thank you for the long-term trust and long-term investment for our -- for the shareholders in CMB.

And that is why we can see our H-share's PB is higher than our A-share's PB. Thank you very much for the overseas investors, especially for our H-share investors.

And just now your question was about how we expect the operating and profit growth of our -- in 2026. I think that for the past years for operating income, we have been facing very big pressure over the past years. And this year is 0.01% growth rate. It's kind of the first time that we have recorded a positive income from 2023 and 2024.

Finally, it's a positive growth, even though it's a very small growth, but it's a very hard earned one. The small growth can also illustrate or demonstrate that we have been very resilient in our business growth.

And this year, why we are facing such a big challenge or pressure? I think, one of that is that, while our traditional advantage lies in retail, but retail business has been affected -- highly affected by the policy side and also highly affected by the external environment. So we try to make up the shortfall from the retail sector by moving up or have more growth on the other business sectors. And this year, we have a slight positive growth this year.

But whether we can continue to have the 3% or 5% growth in the next years, I think from the business indicators, we will be very proactive and to make efforts to achieve growth and also such as for the customer base growth and also asset and liability growth as well as especially AUM growth. So these are the preconditions for how we can make growth on the financial data. And in terms of the financial data for this year, our expectation is that -- we think that stable -- we will have stable growth. And also, we want to make improvement. We will try to make improvement in the stable growth, whether we can achieve that goal. It's hard to tell, but we will make efforts to own that, such as in the NIM sector, last year, we stood at 1.87%, 11 bps year-on-year decline. And this year, I think that the year-on-year decline of the NIM will be stably -- will be stably declined, but the magnitude of the decline will be smaller than last year.

Last year was a year-on-year decline of 11 bps. This will -- the decline will be smaller than that. The main reason is that from the policy side, I think that we are expecting more rate cuts and also the RRR cut this year. If there will be more rate cut, it means that it will affect our asset yield as well.

And the second reason is that when we are looking on the credit side, we are seeing that quite weak credit demand. There is very fierce challenge or competition for the credit. So people are trying to grow more volume. Banks are trying to grow more volume to make up the shortfall from the decline in interest rate. That is why we cannot see the end to a rebound of the interest rates. So this will also pose a challenge to our NIM to our interest income.

And the other sector is on the -- factor is on the liability side. On the liability side, last year, the funding cost has been down by 38 bps. Last year funding cost is already one of the lowest among banks. But among the peers, the room for us to further decline will be smaller, and that is why we are still facing pressure on the NIM side.

And in terms of the non-interest income, last year, we have seen fast growth on the wealth management fee income so as to make up the shortfall from other non-interest income. But this year, we'll continue to see other fee rate cut policies on such as a mutual fund. So this will also affect our fee income from the agency sales of mutual funds and challenge, that is also a challenge on the fee-based income.

And also the third uncertainty comes from risk sector. For the corporate sector is under control and also stably declining. But still, we are facing mounting pressure on the retail side, especially for micro loan consumption loan. So we try to control the risk so as to reduce the credit cost and to maintain a stable profit growth. These are the negative factors that we are facing. And why I say that growth on the operating income and also profit side, we are still under pressure. But last year, we are trending into a better direction. It's more kind of contributed by our active -- where we have active believe we tackled the challenges, how we have responded to that. So we have quite good results last year, which is -- you are seeing it stably turning to a better trend.

And as for the question about -- you also asked about the ROE, like this year, we have slower profit growth, but the growth rate for our equity and after the dividend payout, we still have quite a big volume of the equity, which is supplemented to the existing one. That is why equity is -- growth rate is faster than the profit growth rate, which lead to a decline on our ROE side. And ROE this year is 13.44%. And from the Board and also from the senior management, we highly emphasize the level of the ROE. As long as we have high ROE, we can have a relatively stable return to our shareholder. We are strengthening the management on our ROE to improve the return on our capital.

But my judgment is that, still we are facing the pressure on ROE decline or the trend will continue. Whether it will bottom out at around 10% or 11%, I think we will control the speed of ROE. I think 10% will be depending on the future external circumstances and also interest rate, I think the 10% will be a bottom for us to have a better control of our ROE because I think a bank if can maintain ROE of 10%, it means a good return for the shareholder. But we also compare that our bank's ROE and also the advanced banks in the world, we think that CMB is still in a leading position. So I think that we will try hard to maintain a sustainable ROE.

And for 2026 and for the next few years, I would like to conclude what we have Mr. Wang has just said. The first one is that the cycle is the same, namely the CMB's business cycle is the same, in line with the sector cycle, but we are -- the marginal performance of CMB is better than peers. No matter it's in a downward cycle or upward cycle, I think we are trending toward a more a better trend.

And thirdly, we still have our existing advantage during this cycle, even though our business cycle is in the same trend with the sector trend. But marginally, we can see we are improving and also, we have a very obvious advantage. This is a conclusion of our performance. This is my conclusion for CMB's performance in 2026 and continue forward.

We'll have another question from the on-site participant.

I am Gary from HSBC. I have a question about NIM outlook. We noticed that in the fourth quarter, your NIM was experiencing quarter-on-quarter growth, which is for the first time for the past 3 years, I would like to learn from the senior management. Do you expect the trend to be continuing in 2026? And when do you expect the turning point of NIM to be up here? How do we understand that?

Thank you for your question. So just now President Wang has mentioned a bit about the judgment about NIM. I fully commit that the direction is correct. In 2025, our NIM was 1.87%, down by 11 bps.

To see from quarter-on-quarter change, quarter 1 -- 1.91%, 1.86% and 1.83% and 1.83% in quarter 1, 2, 3, 4. There are some characteristics of our NIM. The declining trend continue, but the magnitude actually shortened. In 2025 the reduction was 70 bps. In the annual operation of our NIM, we see some rebounds in the fourth quarter. But there are 3 bps up on quarter-on-quarter change. And for the group-wise, that was 2 bps.

You can also see from our external change of the interest rate environment, there are some contribution given by these factors about our NIM. So there are quarter-on-quarter increase for the bank wise in terms of the NIM in the fourth quarter, in asset and liability management of the bank, we have made great achievement. In pricing, we have been quite following the self managing mechanism, and we have strictly followed the principle to give the loan pricing. So generally, we have improving the loan pricing condition.

The second perspective is that we have made achievement in improving our structure. We have increased the proportion of assets that are earning higher asset yields. Even though in the demand side, we are experiencing some pressure, but we strive our best to promote the growth in assets, and it has also contributed to the final results. In the fourth quarter, for instance, for some low earning assets, for instance, like bills, we have been reducing its proportion. So all-in-all, that factors contribute to the rebounds of our NIM in the fourth quarter.

You just asked about us whether this trend will be continued in the year 2026. So generally, I think my -- our judgment of the development of 2026, we believe that NIM will still decline, but we are having this wish. And we are having this judgment that the magnitude of decline will be smaller. I think this is a trend for the past several years as well.

You may expect to see the first quarter data that also was the beginning of the year. But when it comes to our judgment, generally speaking, the NIM will be somewhat lower than that of the quarter 4 indicator. The mainly influencing factors are still those external factors such as weak demand in assets, and it further leads to the declining in the loan pricing. And there are also some technical reasons behind. Last May, there are some LBR cut, and we have some floating pricing loans that will be repriced in the first quarter. That accounts for around 78%. There are around 78% of the loans that are to be repriced in the first quarter. So in the first quarter, it will be a concentrated period of time when we see the most amount of loans to experience repricing.

The other part is that deposits. The deposit repricing has not yet complete for the past year. But just now, President Wang also mentioned that deposit repricing for CMB, we should not neglect that CMB has quite a high proportion of demand deposit. We have not that much room to further decline in our deposit cost. So that in the liability side, the cost reduction will attribute less comparatively speaking. In 2026, NIM will continue to reduce, decline, but the magnitude of decline will be better than that of the past year.

We will take further measures of liability and asset management. We have made a very accurate and very comprehensive management. We have been asked by our Board to maintain a leading level in NIM and we aim to achieve these goals in the year 2026. The first is to realize the magnitude of decline of NIM to be smaller than that of the past year. And the second is to achieve the stability of NIM as soon as possible. We wish that we could achieve this goal in the second half of the year. And third, we can maintain a leading level in the industry about our NIM. Thank you.

Thank you. President, Peng. Let's just wait a second, and we have also got some questions from online. And I think the next question will be given to an online participant from Guotai Haitong Security, Zhu Chenxi.

Can you hear me? I have a question for President Wang. You have just mentioned that CMB has been listed for over 20 years. And you have taken us go through the history, for the past 20 years, such a long period of time, CMB is actually begin to develop -- think about its development model ever since the financial crisis in 2006. I think by that time, you actually penetratedly choose Retail and Wealth management as your development priority. And as we take a look back, this choice has made CMB a leading position ahead of our peers around 1 decade.

We have deeply plotted our choice to deeply develop retail finance. And we have experienced a glory brought by the retail strategy in the year 2017 to '21, which was also shown in the evaluation in the capital market. We have also experienced some pressure due to the change in the external environment. Standing in this time point and looking into the future, we are now in a new phase of economic development. How do you consider -- how does CMB consider a new competitive edge for yours in the future?

Thank you for your question. As you say, CMB has been listed -- has been adopting the retail strategy since the year 2004. We have forge our systematic strengths. And this strategy has bring us a lot of contribution in our overall development and retail finance has made over half of the contribution for us in terms of net operating income, in terms of profit and et cetera.

And of course, we have overcome some difficulties and experienced some pressure. The retail credit and the credit card business, they are all under external environment pressure and Wealth Management business, the agency distribution of fund management and about insurance policies, we are also experiencing challenges brought by the fee reduction. So this year for CMB, how to adjust ourselves, how to adapt to this new environment and maintain sustainable development, we need to have some new mindset. So on one hand, we have been developing a coordinated and balanced development of the 4 major segments.

The 4 major segments are Retail, Corporate, Investment Banking and Global Markets and also Wealth Management and Asset Management. So by consolidating the systematic advantages brought by retail finance, we will consolidate its contribution to CMB and speed up to build up our strength in corporate finance and corporate finance, especially for cross-border finance, manufacturing finance, tech finance and et cetera. They have all made good achievements. For IB and Global Markets business, they are becoming our new growth pole. Asset Management and Wealth Management business, they are all showing good growth momentum.

So these 4 major segments, they are coordinated and balanced and supporting each other. And for the second aspect, we will speed up our four initiative development, especially for the international development. For CMB, we propose to develop cross-border business overseas business, FX business. These 3 businesses will be the pillar of our cross-border finance development, our international development.

In comprehensive development, we will give full play of our full licensed characteristic and enlarged our subsidiaries development and to make sure that these subsidiaries are the top players in their areas. We have also made good results in these fields. Fourth, we will -- we are also sticking to our differentiated regional development philosophy.

Beijing, Shanghai and Shenzhen used to be the 3 core cities that makes the most contribution to us. We will be driven by these 3 core cities and to and transform into the 3 major regions: Yangtze River Delta, Greater Bay, and the Bohai Rim, the 3 key regions will serve to be the new 3 core regions of our business development so as to make us more sustainable in development.

We can make sure that by developing these 3 regions, the business in these 3 regions, we can maintain a good momentum in the future development. I think by leveraging on these several aspects, we can transform from the previous retail-driven strategy to a multi-segment balanced and coordinated development of our new development model so that they can support each other, promote each other. For the past 2 years, all our domestic and overseas branches, our subsidiary branches have both -- have all realized product making and our business tend to be more balanced, more sustainable, and we are walking towards an era with multiple contribution given by different sources of revenue.

And to answer your question, I think -- these are the measures that we have been taken and what are the positive results that we have achieved.

We have a question from on-site participants.

I am Yang Shuo from Goldman Sachs. I noticed that you have been experiencing fast in retail finance. I noticed some risk in the retail finance -- retail loan business. For the second half of 2024, you have quite a fast growth rate of the non-mortgage loan. And I would like to understand the risk about this part of loans? And could you further elaborate? And could you also provide more details about the provision in these part of loans?

Thank you for your question. So just now President Wang have mentioned that the retail credit asset quality. Since 2019 after the pandemic happened, credit card risk begin to arise. And then until the year 2022, we observed that the corporate property loan risk begin to expose and then it continues to rise in terms of its risk. Excluding the credit card loan, the rest of the retail loan, for instance, the mortgage, the consumption, the micro loan, ever since the year 2024, we also see their risk begin to rise.

Until now, the rising pace of their risk tend to be slower. So for some specific number, I think I will leave it behind. But for special mention, NPL and overdue loan, their balance and the ratio both increased in terms of micro loan. For consumption loan, its NPL ratio, it decreased a bit compared with the end of last year. Special mention loan ratio rise a little bit. Well, in terms of the future outlook, in the short run, property market is still under a deep adjustment so that the residents income, whether or not it could be improved for consumption, for micro finance loan, they are still under pressure. Well, along with the path that the government are playing a bigger role in terms of their proactive fiscal policy and monetary policy and with the external environment tend to be trending towards a good direction ever since this year, micro finance loan and consumption loans, this NPL balance increment are now tend to be slower marginally.

In the low interest rate environment, some profit-making products, they're actually experiencing some slowdown in the profit-making level in their risk variance level. So in the following pace, we will further optimize our structure and stick to a collateral-based business, especially for consumption loan. And consumption loan, we will strictly got our bottom line of onboarding these clients and further optimize our customer structure, which will have early warning, early risk exposure and take proactive measure to lower the risk of arising from retail credit and to guarantee that the retail assets tend to be good -- maintain good in its asset quality.

For allowance -- for allowance and provision for the past year, the allowance coverage ratio was down by 20 ppts compared with that of last year. The main reason is the NPL balance increased. The NPL balance increased by RMB 2.5 billion, a growth rate of 4%. The provision balance tend to be lower. So the numerator decreased and the denominator increase so that the allowance coverage ratio decreased for personal credit, but for personal loan, in classification, we tend to follow our strict manner.

In the overdue days, entering into the doubtful level into the subdue level, we still keep our very strict classification management. In provision, we are making the provision one case by one case. The main reason is that the overall balance of the personal loan continue to increase, and the allowance, the provision tend to decrease. That is the major reason. So looking into the future, the major reason is that the NPL balance need to decrease, so that our allowance coverage ratio could be better.

So actually, this indicator is quite sensitive to its numerator. If CMB under this external environment, if we can control our balance of retail NPL, we could maintain a good condition of this allowance coverage ratio. We are still under challenges in the year 2026. Retail credit risks are a market problem or an industry challenge that every banking peers are facing. The retail assets are under pressure so that it's not just CMB are facing this question.

By responding to this challenges, we will maintain and take proactive measures to guarantee the retail asset quality to be stable. We will conduct very strict asset classification and make very adequate and accurate provision. Our allowance coverage ratio is now 391%, which is 20 percentage points lower than that of the previous year, but the absolute level of this indicator is still higher than that of our peers. We will maintain a very steady and prudent provision strategy and make sure that we have abundant coverage of our NPL to guarantee that we are having a good provision level compared with our peers.

Next question, please.

I'm from CICC, Zhang Shuaishuai. My question is about the intelligent -- follow-up question. Just now I think Chairman and also President and also Mr. Zhou has already have very specific answers on that. And I see that we have more disclosures on the intelligent part. So my question is, from the financial data, how we can evaluate the effect from the application of the investment into AI because you have put a lot of resources in AI?

And another question is that you want to build up into the first intelligent bank. So how we can evaluate that, how we can compare you with other Chinese banks? Now CMB want to do more, AI want to be best among the banking industry. How we can -- we evaluate the advantage of CMB in this spectrum?

As for the large model from its birth to now it's 3 years. So it's not a long period. The application of this technology and every day, we are -- we can see news from the media that is improving. And I think the real impact of the technology on the society is still in the process. Currently, the very -- the industry, which have been deepened reform by the AI technology don't have much. We don't have much industries on that. But overall, we can say there's not many industry that have been deeply reformed by the AI technology and banking sector is quite a different sector and the regulator's attitude towards the application of AI in banks, not only the Chinese regulator, but the overseas regulators such as Singapore regulators, they are quite prudent on that front. And as well as -- such as the Singapore authority, they have also made very strict regulations on the application of AI.

So for the Chinese regulator, the requirement is that the apply of the AI technology should be taken account from the human staff. So it means that the application of the AI among the banks should be human staff plus AI application is a requirement from the regulator as well. And from CMBs, we think that in the width and depth of the application of AI, we are faster than peers. But currently, for 45 kind of the areas, we have analyzed what human staffs are doing. For the projects that human staffs are doing is around 3,400 done by human staff, but amounted around 1,500 could be assisted by AI. So it's a dynamic process that we are kind of analyzing and also improving. And from a very macro perspective, we see that AI is taking effect in many areas. But I know that the question you have raised is also something that I'm thinking about.

And what changes or big changes that the AI application has been done to CMB. I think there are some changes but still in the process. There's changes in the macro side, such as for the Sunflower customer, the customer reaching out ratio has been improved by 14% for our relationship manager. So it's taking effect. And for customer transaction volume has been increased by 20%. So it's also quite a good number. So overly, I think it's taking effect. But from this kind of up -- so we think that the technology is still improving and moving forward, there's great potential on that. And we are firm in this AI-first strategy. This is to your first question.

Second question is, well, how can we say that -- how can we evaluate intelligent back? This is something we are done. And I think that we are starting what are the indicators that can evaluate -- how we can evaluate digital intelligent bank?

The first intelligent bank in terms of -- I think that from these aspects such as for the application of the large model like the research technology and research capability in terms of the application, we can -- we are ahead of the peers. And also, we need to improve the efficiency of the usage of chips.

And in China, we are more use the domestic chips and how we can better improve the efficiency and how we can improve the computing efficiency. We're still improving, but it's not very mature yet. And it relies on the entity that is using the chips. We are very strong in terms of cloud, and we have around a team of 300 people, who are engaging in the cloud technology. And also, we have a reasoning platform as well.

And for the computing around 35% are done by ourself is quite the level of the top Internet companies is like 19% of us to make use of a cluster of chips and responding very fast and do not have much delay. There are many difficulties in technology, but we have done quite well. And the width of the application, we have already applied large model to 859 scenarios and more of them are contributed -- concentrated in the high-value scenarios. So we have a very big width on that.

And for CMB, we have a special area even compared with advanced banks in the world, we have a very good fusion of technology and business. And technology could be better applied to business. So CMB has done quite well in the fusion integration of business and technology. And there are some concerns that maybe AI can substitute human being. So I think the people who will be phased out in the future are the ones who cannot use AI. So, we are encouraging our staff to use AI. So that is why we can see a very fast speed of the usage of token. And people are -- staff in our bank have very -- have been very open-minded, and they're trying to use the new technology. So we are ahead of the peers in this regard.

But what can we say about the, what is -- what is intelligent bank. I think we are still studying how we can evaluate that. And just now, I mentioned about the illusion elution and these are also challenges where kind of input more -- to put more investment on that. And what we are trying to do is to reduce the illusion and to build a more reliable agent.

And for CMB, we think there are some top companies like the AI, OpenAI and Anthropic. They are not open sourcing and they do not say anything about that. So how we can limit the illusion of AI application, and there's -- let's talk on that. It means that we need to input by ourselves, and we have made quite good progress on that, especially in the past 6 months. And also, we have made quite a good target on that. Thank you.

From the investment and output perspective, because if you want to build an intelligent bank, there will be much impact for CMB. Our investment into the -- investment is to optimize the resources allocation. It's not the same as other companies. Other banks may have not invested in this regard and need to increase a lot of CapEx in this regard. But for CMB, we have been continuously increased resources into that. So we are optimizing resources. It doesn't mean to increase much capital investment into that. So it doesn't have much impact on the cost side.

So banks, IT -- I can see that we are -- in terms of business perspective, we have already built up our advantage. So next phase, we are building our advantage and our moat in the technology area, so that CMB can have a long-term and sustainable competitive edge.

And I have one more -- one more point, point to that. I think a good question is better than a good answer. This is the same question that I asked Mr. Zhou. So today, I think that he has answered my question before, but it's not a very, very good point and doesn't satisfy me. Today, I think he made quite a good point today.

Just now, for the retail -- my question is about the retail business for this year, both for asset size and also for asset quality. And CMB is regarded as the best retail bank among the industry. How you can continue to grow your retail business and also consider the change of the environment to upgrade your retail business. Could you please explain from the perspective of retail credit and also for the retail credit business, how you can -- what is your short-term and mid- and long-term change and also how you can arrange that?

Thank you for your question. And as you mentioned, that just now I mentioned that CMB's retail business is facing quite big challenge, and we have made -- we have tried to be more comprehensive operating as to make up the shortfall. But even though we are growing our other business, we didn't forget the retail. Retail continue to be our strength and can be our advantage. So everyone in the CMB talks about retail and knows about retail and trusts retail business. So this is a culture has been embedded into CMB -- embedded in the mind of everyone of CMB. So we will continue to expand our advantage on the retail front.

So for this year, the retail contribution to our income has been quite stable. It's not growing very fast, like in the past. But the business actually have changed. In terms of structure, such as you can see the customer base, like that we have a very big retail base to 224 million, especially the high-end customer growing faster. Secondly, our AUM is growing very fast last year, reaching around RMB 17 trillion and up by RMB 2.6 trillion.

So the growth rate is a high ratio. In the past years, annually increment is around over RMB 1 trillion, but last year, it's over RMB 2 trillion. And thirdly, even though we have seen a quite a big decline in the growth rate of our retail credit growth. But last year, we are continuing to see more market share in the market share in terms of the retail credit. So this shows that the strength of our CMB's retail business is actually expanding.

In order to consolidate our strength of our retail business, we continue to expand the customer base; secondly, to improve the product system; thirdly, to upgrade the service system like we are combining online and offline service channels, so as to improve the customers' experience with us; and also fourthly, distribute our ecosystem, such as we work with the mutual funds and also trust companies as well as asset management companies to build up our friendship with the ecosystem. So we have more better products that we can provide to our customer and create value for the customer. And fourthly, very important, is to prevent risk to improve our system kind of strength in the retail side so that we can see the contribution from the retail side is still around 50% to our operating income and also profit.

Just you also mentioned about the retail credit and also the Wealth Management business. For retail credit, we have the credit card, we have a mortgage. We have consumption loan and micro loan, the 4 major projects -- products. So last year, we have negative growth on credit card. But our strategy is that we maintain a stable and low volatility trend to prevent the risk. So we think that some of the decline in our revenue or the business growth in order to maintain a stable asset quality last year, the credit card's NPL ratio is around 1.74%. It has been stable over the past years and be better than the peers.

In terms of mortgage, we continue to grow the secondary housing facing the decline in the demand side. And so that is why we have slight growth on the mortgage side. The growth rate cannot be compared with a fast growth rate in the past.

So for micro loan, we are doing inclusive financing. And -- so inclusive financings and also micro loan, 80% of them have collateral with the property as a collateral. So the risk -- overall risk is under control. And consumption loan, we think that we are centered on the retail customer that we have already salary payout and also AUM. And this kind of short-term demand for us. So it's -- the asset quality is also stable.

So for our total retail credit, quality totaling around RMB 3.6 trillion and around 50% of our total asset. So it's continued to be an important area that we allocate our credit resources for. We will continue to namely to kindly to take advantage of the -- advantage of retail credit and its small ticket size and also the risk is more diversified. These are the advantage of the retail credit card -- retail credit business.

In terms of Wealth Management business, I think that we will seize the opportunity brought by the capital market, especially people's demand for -- to allocate more of their assets to the financial products. And so for product side, we need to be more advanced, and we have mutual private fund and also for precious metal and also overseas investment, and as said and also Wealth Management products, we have different product lines. And also, we need to upgrade our product system to better satisfy our customers' needs.

And secondly, very important is how we can improve the service -- so how we service our customer. Online together with the offline is combining them together, very important. This year, we are more allocating our offline relationship manager service the high-end customer, and this is a better resources allocation of the relationship manager.

So in terms of Wealth Management, we will continue to maintain our fast growth strength. So the total income of the Wealth Management can also continue to grow. And I have a goal for CMB, namely for a restart of the retail business and also faster growth of the corporate business. So for Retail, it means that Wealth Management should be strong and also continue to build, maintain the -- one is to improve the asset quality and secondly is to maintain the solid advantage of the funding source and also to strengthen our advantage in Wealth Management.

We'll have next question from an on-site participant.

I am Yu Lihan from JPMorgan. I have a question regarding the capital. We have noticed that in 2025, CMB's RWA growth rate was 10%, which was faster than the 8% asset growth rate. I would like to understand the underlying reason behind. Is that a one-off reason? Or is a normalized influencing factor that will continue? Looking ahead, how do we look at the RWA growth rates as a loan growth rate for the future 1 to 2 years? And what is the trend of the CAR? Will we continue to face downward pressure? What's the influence to return of the shareholder and also the cash dividend payout?

Thank you for your question. I will answer first on RWA. So every year, when we are discussing about RWA, we have been emphasizing that we aim to lower the volatility and maintain stability. So for many years, our RWA, the level of it was around 9% to 8%. And it's overall stable, but we will adjust it a little bit according to the external environment. It's more or less around 9%.

So just now you mentioned that in the year 2025, the RWA growth rate, 8.8% under the weighted approach, 9.5% under the advanced approach. Generally, it's following our philosophy. Compared -- but compared with our asset growth, you might think that it would be a little bit higher. So I would like to explain more a little bit.

So I think the influencing factors are, in the year 2024, the swift from the new capital regulation is actually conserving some capital for us. So that, that will be having a low base effect comparing the year '24 and '25. And the second reason is that when the credit loans are under pressure, the corporate loans are taking higher proportion and these type of loans are having higher risk weights. So to some extent, it will enhance the RWA. And then the 3 influencing factor is that as we have quite strong capital strength, we could use it to support some off-sheet business, for instance, the bill discounting business and et cetera.

And the fourth reason is that, in bond investment, we have enhanced our bond investment and enhanced the market risk assets. So these 4 reasons above mentioned, generally contribute to our higher growth rate of RWA. But I once again want to emphasize our philosophy. We would like to lower the volatility of our asset allocation. And I think it's also a capability to help us to sell through the cycle.

We will maintain our mid-level of RWA growth to 9% to 10%. And there will be some slight changes according to the external environment. We have also noticed that our CAR experienced some slight decrease, but the reason is mostly about some one-off reasons. For instance, we have had 1 interim dividend payout in the year 2025. And last year, due to the market volatility, we have experienced some volatile influence in our OCI account. This is also another factor influencing our capital strength. But excluding this factor, our CAR continued to be stable. But when our CAR tend to be more and more abundant and when we are facing more and more pressure from the capital, it's quite difficult for us to see a continuous increase in the CAR.

But even though I still wish that we can leverage our own efforts to achieve a balance in business development, capital growth and et cetera. So I think that for the dividend payout question, I have also just answered that we tend to be stable. I think it's a triangle balance that we aim to achieve that is business development, dividend payout and capital strength.

We will have another question.

I am Qi Leon from CLSA. I have an asset quality question. We noticed that in the fourth quarter, CMB's NPL formation has been increased. I would like to understand the reason behind. Is it because of the micro or consumption loan you mentioned before? Is it about some quarterly reasons? And we also noticed that President Xu, you have mentioned about the decrease of the allowance coverage ratio and our principal to manage this indicator. I would like to understand that how do we balance the product growth and allowance coverage ratio? How to achieve the balance between them two?

So for the fourth quarter, our NPL formation was RMB 21.1 billion. There are some slight increase compared with the third quarter, an increment of RMB 5.9 billion, mostly from corporate loan, that is RMB 4.6 billion. So corporate loan NPL formation saw an increment of RMB 4.3 billion compared with that of the third quarter. And for retail loans, the NPL formation was around RMB 6.3 billion. And for credit card, the new formation is RMB 10 billion. So generally, the fourth quarter, the increase in the fourth quarter in terms of NPL formation are mostly from corporate loan.

So the corporate loan -- so these NPL formation loans are mostly from corporate property industry. Some existing risk identified risks. And there are some exposure of individual cases and individual clients. And some individual event cases or clients risk exposure, they will cast influence on the NPL formation for a single quarter.

So there will be some fluctuation during quarter-on-quarter indicator. But overall speaking, if you take a look at our corporate NPL loan, we are experiencing some improvement. So for us, since the year 2022, we begin to expose risk in the real estate sector.

Ever since the year 2022, the real estate NPL, NPL formation tend to decrease. And in the year 2025, our real estate NPL formation continue to decrease. And it's also at the lowest point for the past 5 years. To see from the first quarter of 2026, the corporate loan and asset quality remains stable and they are in order.

For those risks that have already been exposed, especially for those real estate groups, we have made quite adequate and abundant provision. So the average level of LRR was 3x higher than the average level of those of the general corporate loan. You have mentioned about the allowance coverage ratio. In the year 2025, the figure is 391%, which is 20 percentage points lower than that of the previous year. The fourth quarter NPL, we have made some provision, 14.14% higher than that of the previous quarter. But you can still see that the absolute level of our allowance coverage ratio is still quite leading in the industry.

So making provision is being influenced by many factors. We would make provision case by case, and we should take several factors into consideration. First, scale, the product structure, the corporate loan and the retail loan were different in terms of their weighted risk and customer quality and customers' internal ratings are still factors that will influence the provision we made, including how do we take a look at the external macro environment. If we consider the external environment tend to be stable or do we expect there are more uncertainties in the future, we will also consider this factor into consider -- make this consideration and then to make a relevant provision.

One very important factor is that during the phase of the post-pandemic era and the deep adjustment of real estate property, these 2 periods of time are the major reason why we have been making abundant provision. So generally speaking, these 2 adverse factors, they are fading out. The real estate market are hitting the bottom -- are in the process of hitting the bottom. So we don't see the necessity to make even more provision for this industry. You can also take a look at our absolute level of the provision. It's quite abundant.

In the year 2021, the figure was RMB 37 billion. And for the last year, the level was RMB 42.6 billion. But compared with our loan scale, the ratio experienced a slight decrease. The allowance coverage ratio is not a figure that we used to balance profit. It is calculated based on our expected credit loss, based on our loan scale, based on our internal credit rating. So we will still make very abundant provision. But if the NPL balance increase, it will cash influence on our provision.

If one day, our NPL balance stop to increase, I think we will see some uptick in our provision and in our allowance coverage ratio.

In order to ensure the rights of the individual participant, we have collected beforehand through e-mail about their questions. And as most of the questions actually overlap with what we have also discussed previously, so we will have 1 representative questions read out by our staff.

The question is CMB last year have received approval to establish AIC. I would like to understand what is the major business of this company. And except for debt-to-equity transfer business, do you consider to make equity investment? What is the function of this company's role in CMB's comprehensive development?

Thank you for the question. Last year, approved by the regulator, now we have set up our investment company, namely the AIC. And last year, we have opened the AIC successfully. And this is a very important milestone of our comprehensive operation in order to have a better integration of investment banking, and also commercial banking to better service those start-up companies. And now we have a more -- we can provide more comprehensive service and have coordinated business in terms of investment banking and also commercial banking.

According to the regulator that want this to -- in 2018, there is a policy that -- in 2018, there was a batch of the AIC company that have been set up to do the business, namely to convert the debt into equity. And nowadays, business are also changing. So more are doing toward the equity investment directly.

So CMB's AIC will be both for the debt conversion to equity business and also at the same time, equity investment services. So for Commercial Banking doing equity investment is kind of a very big transition of the business model. So we need to have the right person and right business model in place and right purpose in place.

So from the regulators' perspective, they are For newly opened AIC, the regulator need to have new approval for the business qualification on that. And we are also have a conversation with the regulator and communicating with the regulator because we have very good foundation in terms of equity investments, like we have the CMB International and also CMB International Capital. We have done equity investment in the past. We have around a team of 200 people. We have many successful investments in the past. And many of the enterprises have been successfully IPOed. So -- and have done quite good results. So for equity investment, if we can get the approval from the regulator, then means that AIC together with CMB Leasing can have a better integration of the business and to -- based on the business foundation that we have and the team that we have to better have a development of our AIC.

And now for second section for a question from the media. Yes, please.

I'm from the Security Times. My question is for the Chairman. Just now you mentioned about the moat. You have mentioned that for many times. And also in your speech, in our annual report, you also said we need to have a differentiated moat. So a follow-up question about the moat is that, in the past, people are talking about retail service and brand name. These are the moat also funding source of CMB. So entering into the new era, what will be the difference of the new moat for CMB. Will that be technology, talent or ecosystem? If you have some key words to conclude CMB's next 5 years core competitiveness, what would you quote, which keywords will you use?

So the so-called moat is the core competitiveness. What we are -- in which area that we are stronger than other people and which we are far ahead of other people. So just now I mentioned in the past, the moat for CMB, many people are saying, is retail is the moat and fintech was the moat. But I think the real moat is that our philosophy, namely customer-centric, which has been integrated already internalized into our corporate culture and has become a routine of our staff. This is the biggest difference between CMB and other enterprises. If you go to the other branches of CMB, after the working hour, if you -- after working hours, you go to the branches there. You see -- you can see the difference between CMB and other people. Our staff never off work on time.

Just now before the results, I asked the office of the -- office of the Board. So after the results announcement, they have passed the information to me about the information they get for the communication between them and the investors. So I think this is the culture, and this is the biggest moat that we have.

And no matter is the concept, no matter is the philosophy of all technology. So by -- it's all done by human beings even without this culture, without this dedication spirit to work, other moat is nothing that will be fall down. This is a keystone that support our moat that CMB is customer-centric is the most that we have built up. No matter it's talent, no matter it's technology or other co-committees.

I think the keystone is the culture. As long as culture is there, then we have moat. So one day, we changed our culture, customer-centric culture, then I think the other moat will also be diminished. So in the past, in the downward cycle of the banking industry, why we also have seen some downturn, but still, we are better -- continue to have a better performance than the peers. This relies on the culture of CMB.

The next question.

I'm from the 21st Century. My question is about -- for the deposit movement. Many -- there are many institutions saying that in 2029, there will be around RMB 5 billion to RMB 7 billion deposits mature in 2026. Some may go to Wealth Management, fixed income and other products. So from the liability perspective, whether you are facing some pressure. So when this kind of term deposits mature, what is your observation? Whether they will be go to other aspects? Just now you mentioned about your subsidiaries and how you can get the deposits which are mature in 2026?

Thank you for your question. Recently, there's a lot of talks and discussions on that. My understanding on that is currently for the matured term deposit, the outflow of the matured term deposits, there will be 2 key elements, how much will mature and second, whether there will be an outflow. For the media have calculated an amount. And for CMB, for the amount that will be mature, the term deposits this year will be a little bit higher than what we have in the last year, but it's not an extraordinary number. I think it's still in a normal range.

And I think more people are more caring about in this low interest rate environment, if the deposit rate cannot satisfy customers' demand on the asset yield, so how -- where the deposit will go. And some say, it may go to the capital markets, some say it may go to Wealth Management and also mutual fund products. There are many discussions on that.

So for the outflow of deposits, I think from a different angle is that, from the customers' perspective, if the deposit outflow, where it will go. If it goes to the wealth management or mutual fund products, then we think that we can provide service to maintain the AUM with CMB. Maybe it may not be shown as a liability, but it's still the customer funds is with us. So we can see an outflow of deposits based not an outflow of customer. And that is why we emphasize the definition of AUM. So that is why you see last year, our AUM is up to RMB 17 trillion and a growth rate of 14%. So this is also a way of retention of the deposit and we are not worried about that.

And the second angle that can provide is from the funding perspective. Some funding are going from the deposits go to capital market as the stock, which in return can be deposit as a third-party deposit with us. So these are recorded as interbank deposit for us.

So from a funding perspective, if we can provide a service and then can continue to have an inflow from the interbank market, it means that outflow of deposits, but funding is not outflowing. So from this perspective, we think from these 2 perspectives, outflow or maturing of the term deposit is not a terrible thing. The first one what we are trying to do is not to prevent an outflow of deposits, namely to have abundant products in place and also to prevent the deposit outflow. Secondly if deposit really outflows, then we have product in place to retain the customers' AUM with us.

Just now you mentioned about the subsidiary of CMB, we have Wealth Management subsidiary. This is also a test of the professionalism of our subsidiary and it means that taking the funding to continue to be within the bank. And secondly we will service our financial institution customer, namely the fund can return inflow into CMB from the capital market.

And fourthly, very important. And I think the outflow of the deposit is also a reshuffle of the banking sector for -- if we can use our advantage and service and product to retain or regain the market share with us to have more funding from our -- from the market. This is something that we are working for.

Next question?

I'm from [ Xinda ] report. My -- the first one is for cross-border business in 2025 for CMB has actually has the funding between the CMB and also the overseas margin can have a connection on that. So what is the plan for CMB's plan for the Bay Area? In 2026, how you can use the platform in Hong Kong to have a better cooperation with the institution in Hong Kong?

Secondly, is for Wealth Management. My question is for Mr. Peng. Wealth Management is regarded as an area of the growth of CMB. So how do you expect the fee income from Wealth Management and also that overall fee income for 2026.

I will answer your first question. Just now I mentioned that CMB is highly emphasized on the cross-border business and highly emphasized in the Bay Area busines -- economic integration of the Bay Area, and we want to have a bigger play in the Bay Area. So CMB's headquarter is in Shenzhen. And for the mid- and large-sized enterprises, we are the very few banks that have headquartered in Shenzhen.

And secondly, in Hong Kong, we have Wing Lung Bank. We have CMB International. We have CMB branch. And also in Macau, we also have our branch. So we have covered major cities in the Bay Area. This is our geographical advantage.

And thirdly, we -- from the national policy also support the growth of the Bay Area and to improve the influence of the Bay Area and to have a better connection between the 3 cities in the Bay Area, especially the funding connection between the cities. And it means that we can have more business in this area, such as for the Wealth Connect and our market share of the Wealth Connect of CMB is leading. And also, we are promoting the capital market and to strengthen such as Hong Kong is improving, stance and positioning as a financial center. So we are strengthening our cooperation with the financial institutions in Hong Kong. So there are many Hong Kong -- many China domestic enterprises are going IPO in H-share. So our CMB International is playing a bigger role on that, such as for IPO and IPO underwriting, and IPO sponsor, they are leading the market.

And also for commercial banks, we have Wing Lung bank. And also Wing Lung Bank can also be a collection bank for the IPO. So this -- the comprehensive service that we can provide to the enterprises that go into the overseas market. And also domestic residents are having more investments, investment in Hong Kong because Hong Kong, the overseas products have a better yield for customers. Some of the customers would like to allocate, have some overseas allocation, and we are strengthening our capability in this regard.

And I think that these are also paying off and taking quite good results. So -- these are the advantage that we have taken from the external environment and also from what we have our own institution, I do think that in the future, there will be a very big opportunity, especially in our major Bay areas in the world that will be tough in financial institutions, which will merge. In Bay Area, there are already some very leading financial institutions among the Bay areas.

CMB even though have only a history of 39 years old, but I think we have the advantage in terms of geographical advantage and we have a coordination between the domestic and also overseas platforms. So we will have a better play in this regard to support the integration of the Bay Area to support the prosperity of Hong Kong.

A brief answer to your second question. Last year, fee income was up by 4 -- or over 4%. This is mainly driven by wealth management products. which is up by 21%. The contribution is from the agency sales of the wealth management, up by 19% and 40% for mutual funds. And also, we have seen growth on other agency sales of the trust products. There's a small decline on the agency sales fee of the insurance products is mainly because of the change of our product structure.

If you look at the premium, it's up by 27% up. But due to the structural change, the realization of the fee income that we get from -- of insurance products is changing namely from -- we are -- that is what have led to a decline on that front. So I think the external environment has been quite beneficial to the fee income of wealth management.

So in 2026, we are more optimistic on that, especially the -- from the national policy also regarded regarding consumption is very important, have played a key role in the future. So these are the positive factors for fee income, but there are also challenges as well as you can see geographical conflicts having quite a posting risk to the economy.

And also secondly, there's a policy side for fee rate card for mutual fund as well. And also thirdly, from the consumption side, even though there are major policies, but still depending on the real effect, whether you can drive -- whether you can drive our credit card fee income or not.

So we think that the fee income from the -- we hope that it will be better than last year, but there are also structural problems like the credit card is so facing great pressure on that. We hope that the decline of our credit card magnitude will be better than last year. And also for fee-based income, we hope that it can continue to have a good growth. Thank you.

Due to the time constraint, I think the last question from the media.

Dear senior management, I am Shanghai Securities. [indiscernible] I have a question for Mr. Wang. In such a backdrop of narrowing NIM, you proposed a value creation bank strategy and deepened 4 initiative transformation, I would like to understand these strategies, what changes have it brought for CMB in specific business development?

Thank you for your question. So in the interest rate declining environment, fee reduction and narrower NIM, these challenges have brought pressure for our development. We proposed a value creation bank strategy and that is our philosophy to create value for customer, shareholder, partners and the society and to realize common prosperity of all. This is a philosophy. It's also a guiding principle for us, to serve as an underlying principle to create value instead of expanding scale separately. It requires us to provide better service to our clients to increase volume, increase value to make a good judgment of what business is good business and how to cash our business development into return to the society. So this will contribute to the bank's sustainable development. So value creation bank strategy is bringing changes for us in our methodology, in our philosophy of operation. We are more reasonable, and we tend to respect the principle of banking operation.

In international development, in comprehensive development, we all see contribution brought by these initiatives. In financial indicators, the full initiatives have also contributed to our capability of making sustainable development. I think digital and intelligent development and comprehensive development, these will help us to find our strength and to make up for what we are not good at. So the full initiative bring us business returns, but also enhance our capability.

Thank you, President Wang. Due to time limit, we have now conclude today's meeting. For more information and details, you may refer to the annual report we released online. If you have more questions or comment, you are more than welcome to contact the CMB IR team. Thank you again. Goodbye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Dear investors, analysts, good morning. China Merchants Bank 2025 3rd quarter result announcement will now begin. I am Xia Yangfang, General Manager of the Office of the Board of Directors of CMB. We have announced our third quarter result in this Wednesday, and this conference will be conducted via audio webcast.

And now allow me to introduce the attendee first. And they are Mr. Peng Jiawen, EVP, CFO and Secretary of the Board of Directors; and General Managers from the Asset and Liability Management department, Financial Accounting department, Corporate Finance HQ, Retail Finance HQ and relevant departments. And at the same time, we have also invited independent directors Li Menggang, Liu Qiao, Tian Hongqi, Li Chaoxian and Ms. Li Jian to attend the meeting online. On behalf of China Merchants Bank, I would like to extend a warm welcome to your participation, and thank you for your warm support and investment in CMB.

There are 2 sessions in today's meeting. First, we will -- introduction given by Mr. Peng Jiawen on the performance of our third quarter results, takes around 15 minutes. And the second session is the Q&A session, takes around 1 hour and 15 minutes. There will be simultaneously interpretation from Chinese to English for this conference.

Now I would like to give the floor to Mr. Peng.

Dear investors, analysts, good morning. This Wednesday, we announced our third quarter results, and I am happy that together with the general managers of relevant departments in the head office, I can communicate with you. First of all, I would like to thank you for your attention and support. And I would like to briefly introduce our operational performance for the first 3 quarters. According to standard practice, the below mentioned statistics are under the IFRS calibre also the H-share announcement calibre. Since this year faced with complicated environment, we stick to our strategic target of building a value creation bank and stick to a dynamically balanced development philosophy of quality, profitability and scale.

And our general development has extended to be development in a good momentum, and there are 5 features of our operation. Firstly, our core profit indicators remain stable and trending towards good trajectory, ROAA and ROAE and CAR maintained at a high level. The group's net operating income was RMB 251.28 billion, a year-on-year decrease of 0.52%, with the decrease narrowed by 1.21 percentage point compared with the first half. Net profit attributable to the bank's shareholder was RMB 113.7 billion, year-on-year increase of 0.52%, up by 0.27 percentage points compared with the first half, ROAA and ROAE were 1.22% and 13.96%, up by 0.01 and 0.11 percentage points compared with this half.

We continue to strengthen cost management. Our cost-to-income ratio was 29.86%, maintained at an appropriate level. We maintained sufficient and high capital level and under the advanced approach, our CET1 CAR was 13.93%, Tier 1 CAR, 16.25%. Capital ratio -- total capital ratio 17.59%, down by 0.93, 1.23 and 1.46 percentage points compared with last year-end. We also strengthened asset liability management and secured both increase in loan and deposit scale.

We cope with multiple challenges and promote the growth of our low-cost core deposit. We maintained optimized liability structure. As of the end of September, our total asset was RMB 12.64 trillion, up by RMB 4.05 trillion compared with last year-end. Total loan RMB 7.14 trillion, up by 3.6% compared with last year-end. Retail loan RMB 3.7 trillion, up by 1.43% and accounted for 51.8% of the total.

Corporate loan, RMB 3.15 trillion, up by 10.01% compared with last year-end. Financial investment balance totaled RMB 4.03 trillion, up by 10.52%. Our total liability was RMB 11.37 trillion, up by 4.12% compared with last year-end. Total customer deposits RMB 9.52 trillion, up by 4.64%, accounting for 83.73% of the total liability. The average daily balance of demand deposit accounted for 49.45% maintained at a high level.

Thirdly, our NII maintained steady growth and our NIMs decrease narrowed. We continue to strengthen our low-cost funding advantages, influenced by LPR cut and other influence along with insufficient effective credit demand, especially in the retail loan, we have pressure in our loan yield of the interest-earning assets. For that, we continue to optimize our structure and strengthen liability cost control to drive the improvement of our liability cost and offset the pressure brought by the narrower spread.

For the first 3 quarters, our interest-bearing liability cost ratio was 1.31%, down by 38 bps, among which customer deposits average cost ratio, 1.22%, down by 36 bps year-on-year, driven by the above-mentioned factors. Our NII was RMB 160.04 billion, up by 1.74%. For the first 3 quarters, our NIM was 1.87%, down by 12 bps year-on-year. The decrease was narrowed. The decrease was narrowed year-on-year.

Fourth, our Wealth Management business has shown good growth momentum, and our net fee and commission income recorded positive year-on-year growth for the first time in 3 years. Since this year, we see recovery in the capital market and the bank sees opportunity to achieve good growth in the wealth management business. Our retail clients totaled 220 million, up by 4.76% for the Sunflower and above client, 5.78 million, up by 10.42%.

Our retail AUM was RMB 16.6 trillion, up by RMB 1.67 trillion compared with the end of last year, a growth rate of 11%. For the first 3 quarters, our wealth management fee and commission income was RMB 20.67 billion, up by 18%, a faster growth than the first half. Agency sales of wealth management products, mutual fund trust scheme grew by 18%, 38% and 46% year-on-year. Our agency sales of insurance policy was decreased by 7.05%, and driving by the above factors.

The group's noninterest income has decreased, narrowed. And for the first 3 quarters, the net noninterest income was 91.24% and accounting for 36% of the total net operating income, among which net fee and commission income was RMB 56.2 billion, year-on-year increase of 0.9%. First positive growth since the year 2022.

Fifth, we maintained stable asset quality. Our NPL has maintained an increase in its balance and decrease in its ratio and the NPL balance was RMB 67.4 billion and the NPL ratio was 0.94%, down by 0.01 percentage points. Our new formation of NPL was RMB 48 billion. Annualized NPL formation ratio was 0.96%, down by 0.06 percentage points. The company closely monitored the change of the external environment and enhanced our risk management capability to prevent risk in key areas.

Under the bank's calibre, the NPL in our property and manufacturing sector were 4.24% and 0.45%, down by 0.5 and 0.05 percentage points. NPL in retail loan ratio was 1.05%. The risk was under control. The group continued to stick to its prudent and stable provision policy. Our annualized credit cost was 0.67%, up by 0.02 percentage points.

Our allowance coverage ratio was 405.93%, down by 6.05 percentage point. Loan loss provision ratio, 3.84%, down by 0.08 percentage point and maintained at a leading position in the industry.

The above are our characteristics of our operation for the first 3 quarters. Since this year, China's economy maintained stable and our high-quality development has made good results, but there are still risk ahead, and many uncertainties were still lying in the external environment.

This month, we see the fourth plan recession of the 20th CPCCC approved the 15th 5-year plan, mapping out the new blueprint of the next 5 years China's development, also providing good opportunities for the Chinese banks. We will continue to promote our transformation into international comprehensive and differentiated and intelligent development and provide better value for our customers, employees, shareholders, partners and the society.

For the next part, we will enter into the Q&A session. Please follow the instructions given by the operator. Please state your name and the agency you represent before you raise the question.

[Operator Instructions] Now we'll have the first question. The first question is from CICC , Zhang Shuaishuai.

I have a question for Mr. Peng about your short-term demand and long-term development strategy and the current environment is not favorable for CMB. We don't see sufficient demand from the retail loan, and we see some challenges ahead which will influence CMB's business. We see some of your banking peers. They're trying to make up the lowering pricing by increasing quantity or lower their risk appetite to realize a short-term financial target? And what is your view towards this phenomenon? And how do you strike a balance? I know that the external environment and the capital environment has posed a high requirement on CMB. And what do you think that CMB can use in terms of your new model, your business strategies to balance -- strike a balance between short-term demand and long-term strategy development to realize an offset?

Thank you for your question. Well, according to current situation, we need to hold an attitude that is objective enough. The macro economy is stable in a steady progress, high-quality development momentum is still there. For the first 3 quarters from the macro statistics, the environment withstand the pressure and make steady progress. But objectively, we still see some challenges ahead. The bank's operation, of course. It requires our attention. For instance, you have mentioned that the demand from the retail loan and the fee card, these are all challenges posed to CMB in terms of our operation. But generally speaking, CMB have withstand those pressure.

For the first 3 quarters, our performance has shown that we have met our expectation. And we have realized good growth momentum. I would like to briefly introduce my view. Beyond the 5 characteristics I mentioned above, there are some other highlights within our performance. I think to some extent, that could answer your question as well. Through our hard work in this field, we have realized a good development, and maintain good momentum. And these are the aspects I would like to mention. Besides on the revenue and our profit, even though they are under pressure. I won't mention too much about it, but I would like to emphasize that behind our financial indicators, there are some situation that I would like to seize your attention.

One is that our customers grow, our customer base growth should show good momentum, no matter our corporate client or our retail clients, we see the client growth as our base of development. And if you take a look at our detailed figure of customer growth, our mid- to high-level clients has secured a growth of over 11% in terms of customer number. Within it, some high value client number, value client number, these growth type are showing good momentum. The CMB's wealth management business have also picked up and realized a double-digit growth in terms of its income.

The wealth management income has realized a year-on-year growth of over 18%. If you take a look at excessive wealth management business, our income has secured a growth rate of over 11%. Our AUM when surpassing RMB 16 trillion level. By the end of September, we have already secured a retail AUM of over RMB 16.6 trillion, an increment for the first 9 months of RMB 1.67 trillion, which is quite impressive. Influenced by the external environment, we see the recovery of the capital market, and this has also bring us opportunity. We see these opportunities relying on our good customer base, relying on our capability, and this is what we will continue to nurture. And I also see some other highlights.

I want to especially mention that our subsidiary are also showing good growth momentum this year. By the end of September, the total assets of our subsidiary companies were RMB 900 billion, surpassing RMB 900 billion, a growth rate of 8%, representing compared with the end of last year. And the net profit growth has surpassed 16%. We see the current opportunity and they have emerged into CMB's overall development. Besides the highlights in our subsidiary, I think we are also developing in our international business. The total asset of our overseas institutions has surpassed 10% in terms of its total assets. We seize the opportunities arising from the Hong Kong market. And our Hong Kong subsidiaries grew 10% in terms of its total assets and 27% in terms of its profit and income. And our cross-border business, the international BOP has surpassed 90,000 customers.

In terms of FX business, we maintained good momentum of growth, a growth rate of 15% for business on behalf of customers. So to -- from the 2 highlights, our subsidiary and our cross-border business, this is 2 of our 4 major developments. We have also captured some highlights from it. And of course, we maintain a good foundation of our asset quality. This is the base of our development. Without a good asset quality, we cannot secure what is building above the asset quality, that is our performance, our customer base and et cetera.

So through this year's effort, I think that can reflect what we have withstand. And to coping these pressures, I think we still have some measures that are going to take in response to the insufficient effective credit demand of retail loan, we still regard the retail loan as the cornerstone of our business. And I think we cannot -- we will not change in maintaining relevant market share and our market position in the retail loan business. So in this year, we have also made some efforts in developing corporate loan under insufficient credit demand from retail side and our asset growth in the corporate loan grew by 10%. And these loan growth are in line with the government's guidance. And later on, I will ask our relevant colleagues to introduce the detailed situation.

We will also maintain a good management of asset allocation and maintain a stable momentum of our NIM targeted at current risk situation, we will maintain good risk management capability. You have also mentioned some long-term strategy. No matter on the beginning of the year or the interim report or our daily communication with our investors and analysts, we have also mentioned about what we are considering about the future development. We have got our layout for the future development, combined with the recently announced 15th 5-year plan, CMB has also mapping out our own 15th 5-year plan.

So generally, we will stick to our plan of value creation bank, building a value creation bank. And for some certain direction, we will continue to focus on the modern industries to enlarge our efforts in the opening up and et cetera. These opportunities arising from some window opportunities, we will seize these opportunities. We will combine the strategic focus of our own 15th 5-year plan with the national's 15th 5-year plan.

Of course, I would like to mention again that developing retail business will still be our focus. And the third is that the transformation of the 4 development will continue to be our focus, the international development, the comprehensive development, the distinguished development and the intelligent development. We will speed up this transformation. This will be implemented thoroughly into our own 15th 5-year plan. Besides our efforts in the business development, we are still paying special attention to our daily management, including NIM management, asset quality management, financial management, expense management, all cost management. These all we will continue to pay attention to and also including risk management, we will guard our bottom line to secure our bottom line of risk management. So generally, for current pressure, we are calm, and we have made early preparation. This will be all reflected in CMB's own 15th 5-year plan.

The second question, please.

The second question is from Mr. [indiscernible].

Congratulations for your results for the third quarter. I'm from PICC. And I think that you have a positive profit growth in the third quarter. And also you have maintained sound asset quality. My question is for Mr. Peng for NIM. Just now, you mentioned about the weak demand in the retail side. So my question will be, what kind of impact will the weak demand be on for your asset structure? What will be the impact on your NIM? So how long do you think that the NIM will continue to decline and whether the declining period for CMB will be longer than that for the state-owned banks?

Thank you for your question. I think NIM is a concern for all the investors. And during the interim results conference, I shared with you my judgment on NIM, namely, we will continue to maintain a leading NIM level, absolute NIM. But for the marginal change, we are under pressure. But I think the decline will be under control. These 3 judgments are made during the interim results. And NIM is -- will be -- is still affected by structure of our asset and liability and also our active management, which is why we have maintained a sound NIM in the past.

Nowadays, we are seeing that our retail loans are still under pressure, which is 51% of our total loan portfolio in the past is kind of the backbone of our loan book. And it's also the main reason why we can maintain a leading NIM. So as for -- currently, retail loan are facing pressure in loan growth, but still it has made quite a big contribution to the NIM. And at the same time, we need to see that if there is a slowdown for retail loan growth, definitely, that will have some marginal negative impact on the NIM. That is why I say the NIM marginal change will be under pressure.

I think there are main 2 reasons behind the pressure. But of course, we will continue to maintain a leading absolute NIM level, but for the marginal change will be under pressure which is affected by the following factors. The first one is a slowdown of retail loan growth, especially for credit card loan growth and also for consumption loan growth, micro loan growth, all growth rates are slowing down. This has made some challenge to the asset structure. And as for -- compared to the peers, we have a higher proportion of retail loan. So that is why we are facing higher pressure than peers.

Second factor is that from the liability cost, just I mentioned, our liability cost is around 1.02%, down by 36 bps, which means that since we have maintained the lowest level of liability cost among peers, and at the same time, we continue to reduce that by quite a big amount, which means that in the future, the further room for us to further lower down the deposit cost will be smaller because if you look at the demand deposit ratio is around 0.05%. So there's a little room to go. And more room coming from the term deposit but we have an even higher demand deposit ratio, which is why we can benefit less compared to peers in the future from the lower down of the deposit cost.

And third judgment is that we think that the future trend will be under control, which means that we have our judgment on how deep that the NIM will go down. We have our own analysis and also we have done strategy considerations about how we can counter with the NIM decline. So firstly, I think we'll continue to focus on retail loans. This year, even though retail loans growth is slowing down, it is around 1.34%. But this number is a strong number, but compared to the overall banking industry, we are still higher than the average level, which means we are increasing our market share.

And the thing I would like to -- the point I would like to point is that the slowdown of the retail loan is mainly affected by the macro situation. At the same time, we don't want to lower down our risk criteria. That is why we have a slower growth rate, but our market share has continued to increase, which means that retail loan is still a focus of our business. And we are stepping up our efforts and also putting more resources into our retail business, we have made adjustment to our retail business unit and also credit card unit. We are confident that we can continue to improve our market share.

And just now Mr. Zhang Shuaishuai from CICC also mentioned about whether we will choose to lower down the risk criteria. I think lower down the risk criteria will not be our choice. The other words to say that is that to make up the shortfall of the loan growth by compromising risk. This is something we will not choose to do. Some say that we need to -- if the price comes down, we need to grow more loans. This means that to grow more amount to make up the shortfall coming from the pricing coming down. But we will not choose to lower down the risk appetite or sacrifice risk to -- in order to gain amount growth.

And I think in the future, that the risk from retail side will be stabilized. And as long as the government is trying to lay out many procedures to stimulate demand. And I think at the end of the day, the retail loan will grow again. And also, we will have active measures such as for corporate loans, we have our own strategy for how we grow our corporate loan, and we have reconsidered great debt, including for big midsized and small sized enterprises and the major areas that we would like to focus on. So we think there's a big room to go.

And also from liability side, we will continue to maintain a sound liability structures such as the demand deposit proportion you mentioned. And this year, we are seeing that the demand deposit ratio is changing or is trending good towards a better direction. This will be also beneficial to our cost control. And thirdly, is the asset and liability portfolio management that will also help with the NIM side to improve the structure so as to improve the NIM level. So overall speaking, I think for the future trend of the NIM, we are confident that hopefully, that the NIM can reach the bottom and begin to stabilize.

Just now for your question, I would like to share 1 of my 2 personal views. I think very important for banking industry today. The first one is that we need to take a perspective from customer. Just as I said, the customer is the foundation of our business as long as we have the customer in place, no matter how product changes because product changes according to the external environment, such as if there's less demand for assets, such as you will face the slower growth of retail, but at the same time, your AUM in your wealth management products can continue to grow. So this also will help with the income for the bank. So taking the perspective from the customer to -- will be very important for banking operation rather than purely focusing on 1 or 2 products.

Secondly, I think very important is balanced and diversified operations. A bank's operation and development cannot focus on one aspect. It should be very balanced and also diversified structure such as if there's a slowdown of retail loan, then if we can do better in corporate loan or if we can do better for the asset allocation for retail customers, if they didn't choose to place the demand deposit or if when the market is not performing well, you can provide more deposit with the customer, or when the customer doesn't have demand for loan, but they still have demand for wealth management, which means that customers demand will be very multifacet.

So if you can provide a balanced products, multi-level products for the customer, you will have a very balanced and also diversified business structure, no matter how customers' demand changes or how the products they choose changes. Then this balanced and also more diversified structure will help you to maintain a more stable income.

Second question, please.

Next question is coming from May from UBS.

Can you hear me?

Yes.

I'm May from UBS. And congratulations for your results in the third quarter. It's a very stable results and also trending towards the better direction. My question is still about NIM. Just now you mentioned for liability cost is declining. This will be beneficial for your NIM. Q-on-Q it is around 10 bps down. So the level of the decline is smaller than the peers. I think that CMB has always maintained advantage in liability cost, but now China has ensued a low interest rate environment. So the advantage for you and the liability cost, is that still strong -- as strong as before? How do you view that? Or do you think the advantage is also contracting?

The second question is that the capital market is performing better. There are some discussions on deposits moving around to other parts outside the banking industry. So whether there will be any marginal improvement on demand deposit ratio. But in the third quarter, you can see that your demand deposit ratio is still declining. But why? Why the trend is still declining? And also for liability costs, we are seeing that the rental cost, rental linked cost and also the debt costs are also rising. What are the reasons behind that?

As for liability cost I think just now Mr. Peng has made his judgment on NIM, I think, it's also applicable to liability cost. Firstly, I think we still have a leading liability cost advantage. For the first 3 quarters, the liability cost is 1.31%, down by 38 bps. And our customer cost is 1.22% and down by 56 bps. And for interbank cost is 1.06, down by 54 bps. So in absolute amount, you can see that we'll have a very low absolute liability cost and a very low absolute level, you can see we still have reached quite a big level of decline.

And secondly, Mr. Peng just mentioned that for the marginal improvement, we are under pressure. So you might concern about if compared to peers, whether the decline level might not be as big as our peers. I think the main reason is that it's mainly decided by the features of our deposit costs. In liability costs, we have a higher proportion of customer deposit, namely around 85% and amounted around 50% are coming from the demand deposit. These are very high. This structure feature or characteristic means that we cannot benefit more from the rate card of deposits because rate card is more on term deposit side rather than on demand deposit side.

And just now I mentioned demand -- customer deposits make up around 85% of the total. That is why when interbank or market rate is coming down, which means we also cannot benefit from that because some of the peers, if they cannot have so high proportion of customer deposits, well, they will have a more higher proportion of the interbank liability, which means they can benefit more. And especially this year, it's very obvious. The interbank costs are coming down quite rapidly, but we have a lower proportion, lower -- that is why when you see the marginal improvement, we might not be big as our peers.

But if you look at the absolute amount, we're still having the very absolute leading position. And thirdly, I think that the trend for the cost deposits to decline is continuous. For September, our RMB demand deposit is only around 1%, and this trend actually continues into October. And for demand deposits for RMB level, we have a daily average growth of over RMB 200 billion. The demand deposit cost is around 1% and it's mainly coming from the demand deposit. So currently, we can see we still have a leading position in the liability cost. And we are continuing to see the trend that the deposit cost is coming down. The only thing is that if you -- from the marginal improvement, since we have a very low absolute amount, that is why the marginal improvement might not be as big as the peers. So I would like to confirm that we are very confident to have a leading liability cost advantage in the future.

Second, to your question about the demand deposit ratio. So for this year's trends, we are seeing for the whole banking industry, it's quite obvious that we have a term deposit trend. And this year, I think this term deposit trend is continuing, but from third quarter with the warming up of the capital market, and also M2 and M1 gap are narrowing, we think that there are more and more deposits becoming demand deposit. In September, for the single month, our demand deposit ratio have increased again. So demand deposit ratio is still our advantage. We will take active liability and asset management measures to promote those settlement-related business so as to gain the source of the lower-cost demand deposit. And when the market -- in the market, people tend to have more demand deposit. If this environment continues, we definitely are confident that the demand deposit ratio will continue to ratio will continue to improve.

And also for thirdly, for the cost for bonds. Just now I mentioned that since we have a very high proportion of customer deposit, 85% of the total deposit. So for RMB side, we do not have any demand to raise RMB from RMB bond market. So this year, we have done some funding raise from the bond market in the overseas market. And this year, since our overseas branches, they have demand for overseas assets. That is why they have underwritten some overseas bonds, so as to raise the funding side, that is why have led to an increase on the RMB side on the cost on the payable bonds. So marginally, you are seeing for the cost has risen, this is mainly because foreign currency-denominated fundraising. And for the rental cost, this is more related to the rental agreement. Rental agreement is set on a certain date. And that is why we are seeing that the agreement was signed previously, so that cannot change for the time being.

Next question, please.

Next question is from Zhu Chenxi from Guotai Haitong Asset Management.

I am Zhu Chenxi from Guotai Haitong. I have a question regarding the income from agency distribution of mutual funds. I noticed that this income realized in the single third quarter, there is a growth rate of 98%, around double. It is relevant with the recovery of the capital market. I would like to understand your outlook towards this income. The growth rate is quite high. Is it sustainable? And the industry itself, the mutual fund industry, we see the third phase fee cut in the mutual fund industry. And what is your understanding of the future influence of this policy, the introduction of this policy.

Thank you for your question. Regarding your first question, my answer is as follows. For the third quarter, the agency distribution of mutual fund is growing fast. It is mainly because of the following reasons. One is that thanks to the recovery of the capital market and the rising risk appetite of our investors. And on the other hand, we have also optimized our structure of mutual fund product, and we enhanced our supply and optimization of the equity-related products. And looking into the future development, the above mentioned 2 factors will continue to give great contribution. But considering the same period of last year, there are some high base effect that we need to take into consideration. I think these 2 factors will marginally become milder in their contribution.

And for your second question about the third phase fee reduction in the mutual phone industry, what kind of influence will it bring to the income of this sector? I think there will be influential reasons align behind. And of course, we will be put under the pressure of the influence itself. But we understand that we are still in the phase of advice consultation, and there will be a transitional period for further implementation. So I think that for the income of 2025, the influence is limited. In the year 2026, the influence will be rather negative, and there will be some pressure on our income in mutual fund business. And generally speaking, regardless of the redemption fee and subscription fee and also the self-service fee, the 3 dimensions will be put under pressure internally speaking.

But to see from the industry level, it is not the first time that we have overcome this kind of fee cut policy arrangement. We will act aligned with the market trend and the customer demand and to make efforts in the following 2 aspects. Firstly, we will continue to follow our high win rate and diversified allocation strategy and take active measures to enlarge our sustained and retained AUM foundation. And for the second aspect, we will continue to follow the market change and understand more and adjust to customers -- adapt to the customer demand to optimize our structure, enhance our resilience and increase the fee rate and increase the return of our product and realize a high-quality development. These are my answers.

Next question, please.

The next question is from China Securities, Mr. Ma Kunpeng to raise his question.

I am Ma Kunpeng from China Securities. I have a question regarding the micro -- small and micro finance business. So in recent years, we see fierce competition in this kind of business, but the demand is quite weak. Especially for the recent period, the asset quality, we see some deterioration and the pricing is also declining. I would like to understand from you about the loan pricing of small and micro size loan. Well, considering the cost, the credit cost, the funding cost, operational cost, when you cover all these costs, will there be further room for making profit? And have you made sufficient provision -- and from a RAROC perspective, will small and micro finance business still become your priority in your retail credit business? These are my questions.

Thank you for your questions. I would like to briefly answer in the following aspects. So small and micro finance, these are a sector under the retail finance business. And just now Mr. Peng has mentioned that in the whole market, the retail loan is under a thorough -- a very tough growth trajectory. So from the market perspective, I think the market is still growing in retail finance business, but the trend is slowing down and the social financing, resident loan and the corporate loan, the structure -- the loan structure itself have all reflect the pressure in the industry itself in growing retail loans.

But CMB, our market share is undoubtedly increasing. And of course, for small and micro finance, we are still faced with challenges such as insufficient credit demand and et cetera. Banks are quite -- are having very difficult situation and trying to find a way out. For some banks, they're trying to expand their volume by using lower loan pricing. But for CMB, ourselves under this difficult situation, we choose a more balanced strategy to cope with current situation.

In response to current situation, we will put risk management in priority. And based on good risk management, we will strike a balance between the growth in quantity and pricing. And of course, the first I'd like to especially mention is that we manage a good control in our risk. We maintain a leading position in the industry in terms of our risk control. The second is that we have secured our pricing in retail loan. We have not used a low-price strategy to enlarge our risk loan volume. It's a reasonable growth, as you can see.

In safeguarding our pricing, we have realized a reasonable growth, a year-on-year growth of around 4%. The growth rate itself is quite leading in terms of our commercial banking peers. I would like to talk a bit more about the risk that you have mentioned. We have increased a quarter-on-quarter increase -- a mild quarter-quarter increase in our risk itself, the NPL ratio. Well, based on the industry trend of increasing risk, we cannot be alone. We cannot stand alone to be having an opposite trajectory. We have been doing a lot of assets in studying industry, in the industry chain and to try to seize more qualified clients.

And the second strategy, we pay special focus on regions with higher quality developments such as Yangtze River Delta, Pearl River Delta. And for the third strategy, we have maintained good control in having good collaterals and nearly 90% of the collaterals are secured by ourselves in terms of our small and micro finance loans. And our asset pricing has continued to evolve and to reevaluate in terms of its collaterals. So we have quite good buffer for our asset quality of retail of small and micro finance loans. And for the provision itself, we are quite confident that we can maintain quite a good leading position in the industry.

About quantity and pricing balance that you mentioned, we have always followed a balanced philosophy in quantity and pricing. We will continue to stick to this principle. And for the second aspect, I believe that under the guidance of anti-involution and self-disciplined mechanism in the industry. I think, to some extent, given some time, the industry will be back to its reasonable competition. I believe that it is quite a good trend that is beneficial to the industry itself.

So I believe that the retail finance, the retail loan, the small, micro finance loan will still be the milestone of our business. And of course, I believe that for the external environment, we could be positive that the trend is still there. The Chinese economy is stable and developing in a good progress. So there will be future room for the growth of retail loans. So in conclusion for CMB, small and micro finance loan is under our guidance, our principles of balanced development, and we will continue to maintain a quite certain proportion of small and micro finance loan in retail loan and also balanced proportion of retail loans in total loan. We will also making efforts to ensure that we have certain market share in the industry.

Next question, please.

Next question is coming from Shen Hu from North Rock.

My question is for asset quality. After I read our third quarter results, in the bank's asset quality are moving in the same direction. For CMB, we can see that NPL has rose by 1 bps. It's -- can I understand it is a normal volatility among quarters? Or does it mean there will be continuous pressure on your asset quality? If you look at other figures like you are seeing the overdue ratio are declining but a slight increase on NPL and also stable special mention loan ration. Does that mean that asset quality is still under pressure, but at the same time, still under controllable or we might not be seeing very obvious improvement in next phase. So can you share with us about the NPL formation trend per month? And how do you look forward to the future trend such as in the fourth quarter and in next year, what other factors? What major factors will you have?

Thank you for the question. Firstly, I think for the volatility, I think it's a normal volatility. It's all under control and under controllable range. Secondly, about the future trend of asset quality or what the challenges ahead. I think for asset quality, I think overall, it's under control. But in different phases for different time point, we might face challenges, such as currently for corporate banking. And I think the major impact will be coming from the real estate sector, even though we are stepping up our efforts in controlling asset quality in this area. But periodically, we might see some volatilities and also see some periodic challenges.

And secondly, for retail, like consumption loan and micro loan, NPL formation, we are seeing it's still increasing. So these are the major challenges we are facing, and this is also the cause for the volatility of our asset quality indicators. So overall, I think everything is still under the controllable range and maintaining a stable trend.

Next question, please.

Next question is from Gary Lam from HSBC.

I'm Gary from HSBC. My question is about your CET1 ratio and also your RWA. In the second and third quarter, we have seen that the CET1 ratio has declined quite rapidly and also RWA growth rates are also faster than what we have expected. So what are the reasons behind? And also what will the -- will this trend continue in fourth quarter in 2026? And whether it will affect your capability of endogenous capital growth and also the continuity of the sustainability of your dividend payout?

Thank you for your question. Indeed, in the second also in the third quarter, as we can see that the RWA growth rate has been quite fast. And as for risk-weighted approach and also for the internal rating approach, we see the RWA growth are speeding up. There are several reasons behind. Firstly, last year in order to -- in line with the new regulatory capital rule, so that is why there was a low base for RWA growth rate last year. And secondly, this is mainly because of the structural change of business this year. And since retail loan is growing lower for the whole banking industry, so all the banks, almost you can see are having a faster growth on corporate side, retail loans slowing down. This is the same with CMB. As we can see its growth rate for corporate loan till now is 10% and also retail only 1.4%.

We all know that the risk weight for corporate loan and retail are different. So this structural change has led to RWA growth. And thirdly is that for bill discounting, discounting rate is coming down. So we hold less bill discounting this year. And we invested -- shifted the investment into interbank lending and the risk weight for bill discounting is also smaller, but risk weight for interbank lending are higher. So this also lead to a higher RWA growth.

And fourthly, in order to improve our profitability, we also have increased our investment for trading purpose, just even though we have lowered down the holding of bill discounting, but we have done more bill discounting for trading purpose on behalf of our customer. So we have slowed down some of the bills after we bought in according to the regulation before we sell down, it still occupies even for the trading purpose, we still occupies the periodic RWA. This also lead to RWA growth.

And fifthly, in order to gain some trading profitability, so we have increased our holding in the PO account and also have done more trading. That is why -- which has led to a higher market risk and also which lead to a higher RWA growth. So all these together, we can see that some are in part due to the business structural change. Some are short period, or volatility lead to a higher growth RWA, especially for the trading parts are lead to RWA growth.

And sixthly, definitely -- and also just you mentioned about the CAR ratio, one is due to the RWA growth and the second one is that another factor, except from the RWA growth rate is because from the OCI account. Last year, we have seen a quite a big decline on the bond holding in OCI account, which were quite beneficial for the CAR ratio last year. But this year, we have seen more volatilities in the bond market, which also affected the overall other income in the OCI account, which definitely has affected the net amount of our capital.

So these are the main reasons why the RWA growth are faster, but CAR ratio are coming down. And I would like to say that the capital management is very important for our internal management. So in the future, I think from 1 perspective, since we have relevant strong capital base, and that is why we will definitely support the business since the all banking industry's profitability are under pressure. And I think we need to expand our trading parts so as to make profit from the trading gains. So we need to support the trading business.

And also secondly, we need to make more precise management of capital. As for different products have a different return on capital, we will analyze that and also to put more resources of capital into the products and business units which have a higher return and also control the resources, which have a lower return. And looking forward in fourth quarter, I think with all measures taken and with more precise management and also we have more -- we need to manage the trend of the CAR ratio.

So in the mid and short -- in the mid and long run, no matter the CAR ratio or the Tier 1 ratio, I think we will continue to maintain our leading advantage, but also at the same time, we also need to utilize the capital to support the business, which are effectively will bring us more profitability. So even though there are some marginal volatility. But in the future, in the long run, I think we will still continue to have a sound CAR ratio and also have a leading position and also stable CAR ratio.

Next question, please.

Next question is coming from Katherine Lei from JPMorgan.

My question is for fee income. I thought your fee income has been positive in the third quarter, whether it's a trend that is sustainable. And in the fourth quarter, whether -- since you have a high base, whether it will slow down or become negative. And looking into the detail of fee income, you see that the asset management fee for the third quarter has -- from turning from negative to positive. What's the reason behind that? And also for the banking fee decline, whether the decline level will contracting or slowing down?

Thank you for your question. So firstly, for fee income, I think it's moving in line with our expectation and is moving towards a better direction. In the third quarter, we have seen positive growth for income. And also, this is a positive growth first time since 2022. And in the third quarter for a single quarter, an increased by 17%. So it's quite a strong growth. And just now my colleagues also mentioned about the reason behind the fee income. So one is coming from the wealth management business. We have seen strong growth on that front, especially from the retail side, including distribution fee coming from agency from the -- and also trust products and also brokerage securities.

And just now you mentioned about the asset fee growth. Even though for the first 3 quarters, I think it's down by 1.9%, but the decline level is narrowing down. The reason behind, firstly, I think it's related to the capital market performance. Secondly, I think, it's related to the growth of the asset management, total assets under management. In the third quarter, it has increased by 2.9% compared to the beginning of the year.

And thirdly, I think we have seen growth on the custodian part. So among the fee income, we have seen quite good performance on wealth management and asset management and also custodian business. So if we look at the trend, I think the capital market is still moving in a good direction. So capital market-related fee income, we are quite confident on that. And the confidence actually is coming from the strong base, strong customer base, especially for quality customers, we are seeing more and more customer growth and also secondly coming from the growth of our AUM.

And also -- but we also noticed that in the fee income among for payment related, fees are quite weak and also still under pressure. And year-on-year, we are still declining. This is mainly because of the credit card business. For credit card business, there are 2 reasons behind the decline or I think it's also a way that we observe the future trend. Firstly, is the recovery of the consumption market. In the first half and also in third quarter, we are seeing that since we haven't seen the data in the third quarter of the consumption data.

But in the first half, we are seeing that the consumption has been down by 11% for the whole market. So the whole market is still under pressure. Our transaction value only declined by 8%. In third quarter, it is down by 7.7% for our credit card transaction value. I think the decline level of our credit part is better than the overall trend, but still is under pressure. So that is why payment-related income, especially from credit card is still under pressure. And another thing to look at that is even though payment from credit card is under pressure, but our market share is still increasing, and now we still have the largest market share. In the first half, the market share -- our transaction value market share is around 14.32%. I think it's still the highest in the market.

But look in the future, with governments continue to stimulate consumption, we think that the consumption market will continue to improve, which will lead to an improvement on our credit card-related business. So we think that we are thing that the trend will be in line with the whole market. And fourthly, just now you mentioned about the investment related other noninterest income. If we look at the other noninterest income, even though there is still a decline in the third quarter, but still the decline level is also contracting.

Amounted income from investment are moving in a better direction. Firstly, the long-term equity investment is improving, including our subsidiary like the CMB Cigna according to the new accounting policy, this is -- we have some increase on the income coming from CMB Cigna. And also secondly, coming from the dividend of our funds we have invested in. And thirdly is from the bond trading account. And fourthly, from the FX exchange, we also have turning from negative growth to positive growth. So even though we are seeing negative growth on the other noninterest income, mainly affected by the bond market performance, but other factors are also turning into the better direction.

Next question, please.

Next question is from Xiao Feifei from Citic Securities.

I have a question regarding wealth management business. Along with the recovery of the capital market, I would like to understand that about CMB's wealth management business, what are the new transitional direction for you? And how do you evaluate the new gesture or new plan for future development? And what is your assessment of your future performance and income in this business?

Thank you for your question. You have just mentioned about a question that we have been considered to think -- the social wealth total volume and the future room to grow, I believe, there are a large room. Well, for us, I think that we would like to seize this opportunity in the overall strategy. We will stick to our principle to develop customer base, especially high-quality customer base. This will be the foundation of our business development. This is the first dimension.

And the second dimension is that for CMB, we are unremittedly pushing forward customer service, a new service mechanism of human plus digitalization. We hope that we can implement this new mechanism to realize a further upgrade and further outreach and deepen our service model that we can deliver to our clients. And the third is that we have -- we see there are a larger room to provide professional wealth management consultation service, and we hope that we can provide a stronger service in this area to provide a better customer experience.

And for the fourth dimension in the product itself, we think that we need to satisfy our clients' clients and satisfy our clients and center on their demand to realize a high win rate plus diversified allocation strategy to realize our balance in our product metrics to cope with potential changes happening in market itself. So generally, we hope we can enlarge our -- we can deepen our study over the market change and to seize opportunities to maintain a balanced structure and to also be resilient to the market. As you can also see that in the third quarter, our work management fee income actually reflects that what we have been doing is to seize the market opportunity.

And finally, in the future. In the financial indicator of Wealth Management business, we think that even though the market has opportunity, we are still faced with many challenges, and these challenges are mainly from these aspects, for instance, the fluctuation, the potential fluctuation of the market, the potential changes in the regulatory requirements, but we are still confident that with the market becoming larger and larger and the increasing of our professional capability that we can maintain a good proportion of the market share and continue to increase our market position, reflecting the financial indicator itself, we will strive our best to overcome the difficulties posed by the third phase fee cut, a fee reduction in the mutual fund industry. And finally, we can realize a stable development, an increase of the fee income and to seize opportunities arising from different types of assets.

We will have the next question.

The next question is from Mr. Wai Sing Chang from CIMB Securities.

I have a question regarding the property sector. We noticed that the real estate NPL is actually decreasing. What is your idea on the progress of exposure in the risk in this sector? And of course, for the next year, we see the maturity of the 16th measure of the property finance. What is the idea on it? And along with the decreasing housing price what is your idea on the influence on your loans LTV? And apart from the property sector, what do you think that the risk that you should pay more attention to?

Thank you for your question. For the property sector's risk exposure progress, I would like to talk about my idea from the following 2 aspects. The first is how do we view the current situation? And the second is how do we cope with it. The first one is that I think from the policy side and from the market side, we are both having some views. From the policy side is that the policy will continue, and our target is to stop the decrease and to maintain a stable development manner.

And I think from my perspective, the market is also showing a divergent trend. So in the year -- trillion, for the RMB 1 trillion level and trillion meters -- square meters level, I think these are 2 aspects that reflects the decrease in the property market, which is quite sharp. I would like to use these 2 idea to conclude my view on the industry. And from the bank's perspective, CMB in terms of our property sector's risk, I have 3 ideas. The scale maintained stable and the structure is optimized and then the quality is trending towards a stable position.

One figure is that from 2019 to 2020, the real estate sector's proportion in our corporate loan is decreasing from 19% to less than 10%, is the decrease in our scale and our structure is further optimized. First is that in Tier 1 and Tier 2 cities, our projects are mostly centered in these cities accounting for over 82%. And the top 10 corporate clients in the real estate sector accounts for over 40% of our total corporate loan and total corporate real estate loans.

So by the end of September, our NPL ratio of real estate loan was 4.24%, down by 0.5%, and we make sufficient provision in this sector, which is 2.5x of the average level of our corporate loans provision, which is very abundant and sufficient. We will continue our policy to back to origin to select qualified region, qualified customer, qualified project and make strict management over our real estate business.

The second question is about the 16th measures. And I would like to talk about some of my idea. In fact, I think the 16th measures have casting good impact on the market to ensure the smooth development of the market -- of the real estate market, especially the guaranteed delivery of the housing project. So in terms of the maturity of the project itself, it actually extends and help the project to secure a soft landing. So generally speaking, why do I say so? The policy will be continued to the end of the year 2026. And for some projects, if the project cannot meet the expectation of its expected sales volume, so probably the policy will continue to be extended in terms of its maturity.

So from the transitioning of the old project to the white list management, I think these management measures are doing beneficiary influence to resident itself, to companies, to government, to local governments. So generally, I think it is a useful measure that is targeted specifically to its audience. So I believe that if the management -- if the project itself could be put under strict implementation. And for the market, I believe that the land price accounts for 60% of the total project volume, I think -- so based on this current situation, our loan is quite secure in terms of the phenomenon.

So the 16th measure itself, probably it will be extended in accordance with the current market situation. I think it is -- it could be considered that the safety itself is under control. And your -- another question about other risk areas that we pay attention to is that besides real estate itself, we are still focusing on other areas such as the debt resolution of the local government and also some industries, for instance, the infrastructure and construction, evolution, relevant industries and et cetera, and also small and micro finance and consumption finance sector.

I would like to invite Mr. Lu from the Retail Finance headquarter to introduce more about the risk in the retail finance sector and also the mortgage sector.

Well, for mortgage itself, the mortgage risk is based on our good structure. I could introduce that most of our mortgage are centered, 90% of our mortgages are located in Tier 1 and Tier 2 cities. The collateral rate is maintained at a relatively low level. The LTV level was less than 40%. The collateral is also under repeat and frequent reassessment. Even though we are faced with pressure of decreasing housing price, we have a good reserve in the asset allocation behind to ensure that the overall risk is under control. Of course, undoubtedly, the trend is showing some upward trajectory. It is aligned with the whole market, not just CMB itself. So the mortgage risk, there will be experiencing some uptick. This is about our judgment on the mortgage risk.

Next question, please.

Next question is from [ Claire ] from GS.

My question is still for asset quality, we can see that the NPL formation has risen a little bit. And just now you have mentioned about the reason already. And at the same time, we have noticed the provisioning level has been down by 7%. But in between the provision for loans are increasing. So how do you see the future provisioning level and also for future provisioning trend?

And another question is about interest rate, your view on interest rate after the Central Bank decided to go into market and buy bonds again. So how do you view the interest rate trend?

So the first question, in terms of asset quality, we continue to maintain our stance as a stable -- maintain a stable asset quality. And for retail and also corporate loan, we take a prudential view in provisioning. Provisioning level, I think, is more related to the business structure change, such as for corporate provisioning is mainly because more special mention loan for real estate. That is why we have increased the provisioning on that. But at the same time, we definitely see -- have some underwritten for the disposal of the assets as well. So overall, I think the provisioning level is stable. So even though there are some periodic volatility, but overall, it will be -- so firstly, really reflect the asset quality level.

And thirdly, I think the volatility will be under control. I have some -- for the provisioning level structure, we can see that we have the provisioning for loan has increased. But for the other non-loan asset provisioning has been declining, and this is mainly related to the total size of the non-loan assets.

And for your second question, do you mean that the PBOC has decided to buy or sell bonds in the market? I think after Mr. Peng has made a statement, there is a volatility in the market and the rate has been down by 4 to 5 bps. So the market estimation is that after PBOC resumes the operation since there will be more alliance on monetary policy and fiscal policy that will help the rate to go down again. So in the third quarter, they will be affected by many reasons. There's a rebound of interest rates. So last year, for the 10-year bond was stood at 1.86%. And in the third quarter, I think it's around 1.8%. There are many reasons behind that. Some are because of the capital markets and some of the anti-involution expectation, and they are also for new tax rules on the new issued bonds, which will be not affected by that.

But after we have resumed the operation of PBOC in the market, I think that will -- our judgment is that, that will be beneficial for the overall investment income. Just now another analyst have asked about the trend of the fee of the noninterest income. So among the noninterest income, other non interest income are affected by the bond market. Last year, we have a -- since the rate was low and that is why we have a high base of other noninterest income. So in the fourth quarter, we are under pressure in this aspect since -- due to the high base.

But after PBOC resumed the operation or if they really have done the operation, I think that the market rate will go down for the bond yield will come down, which will be beneficial for our investment gains.

In order to guarantee the interest of the individual investors, we have collected individual investors' questions and some are more similar to the questions which you have just raised. And now there is a particular one that has not been asked before, which is -- in the first 3 quarters, CMB's corporate banking loan growth rate exceeded 10%. So what are the major areas that the loans has gone to? And whether you have enough reserve -- project reserve in place for the next year. Thank you.

And I think by the end of the third quarter, our loan is 2. corporate loan is RMB 2.8 trillion, up by around $26 million compared to the beginning of the year and the growth rate is 10.27%. If we look at the growth structure in terms of industry, the first largest incremental part are coming from manufacturing. The second coming from the power and also -- and third one is coming from the rental and service industry. The incremental power coming from the 3 major sectors compromise around 49.9% of the total income and which is the first 1 coming from manufacturing and for power and also water litigation is around 11.14% of the total corporate loan.

And increased level amounted is around -- and also for leasing and also for that is also quite big and also increased by around 23%. So these are the 3 major sectors that we have seen increased for that. And when we look at other regions, we are seeing the Pearl River Delta and also High Sea area and also the -- and also the Bohai Rim region. These are the major areas coming from that. So these are the major areas that our corporate loan goes to.

And currently, I think, affected by the overall economy since real estate is not coming up yet, and we are seeing demographically, we are still seeing negative pro income. That is why demand deposit -- for the demand for corporate loans is still under pressure, and there's also a very fierce competition on that. So in the future, I think we still need to look at the right direction to go. And from the reserve and also strategy for next year, from industry and also region strategy, I think that will be similar to the -- this year from industry, we step our efforts also in transportation. And for customer base, except for large focusing on large corporates and large projects, we are also focusing on the midsized corporates to hope that we have more balanced customer structure.

And also from a product perspective, we have increased fixed income projects and also M&A projects, which have a longer duration and hope that we can have a more diversified product structure. So we hope that we can keep our balance among scale and also pricing and also asset quality. And can have a dynamic balance according to the changes in the external environment.

Now I think due to the constraint of the time now we have, the last question please.

And the last question goes to Richard Xu from Morgan Stanley.

My question is still on loan yields and also loan growth strategy. Just now Mr. Peng has mentioned that there are many policies like the anti-involution and also guidance on banks to have a reasonable loan yield. So when you look at the newly disbursed loans, whether you are seeing the yield is coming stabilizing? And also, secondly, you mentioned about for corporate loan, you want to compete for more quality loans. Everyone want to compete in that area. So what will be your major strategy. And thirdly, from the loan growth rate and also the shareholder return, if the loan yield is not good, whether you will consider to slow down your loan growth rate and also to improve the shareholder return, whether that will be a consideration?

Thank you for your question. I think it's the last question, that will be the conclude of our today's dialogue. So firstly, for the loan strategy, this year's the loan yield is coming down. One is affected by the LPR rate coming down and also affected by the weak demand in the market, which lead to a lower yield. And I think when we analyze whether the loan yield has reached the bottom, I think mainly we need to analyze whether the demand is picking up or not.

And secondly, whether the LPR will temporarily stop to going down. So when we look at the LPR cut, our analysis is that with the macro economy, maintain a stable growth momentum. The LPR cut expectation is smaller. But overall, when we look at the GDP Q-o-Q growth rate, the decline of the growth rate is narrowing down like the third quarter is 4.8%. So we expect that for quarterly GDP growth will be lower than that. If there is pressure on GDP growth rate, we cannot rule out the possibility that the PBOC will continue to have the cumulative monetary policy and continue to cut the LPR rate. So this is from the LPR rate and policy rate.

And secondly, if we look at the demand side, if the bank's demand is closely related to the vitality in the marketplace and also vitality in our investment market. But according to the data, we have seen that the investment data relating to investment is not still stabilizing yet. So even though the profit growth of industrials have rebounded a little bit, but demand for loans, still, we haven't seen very obvious rebound. And for demand, definitely, we need to seize opportunities to seek for new opportunities.

Just now, my colleague from Corporate Banking has shared with you some of the areas that we would like to work on. I think mainly for strategies, these -- some of the industries that we need to be even stronger for and for some industries, we currently might have some shortfall, but we want to make up for that. So we need to continue to optimize our customer structure, such as in the past, for corporate banking, we have a higher proportion of large-scale customer, and we might have the highest proportion of large-scale customer, it's around 50% of the total higher than peers.

So it means that for -- there will be further room for optimization of customer structure. And if we can also expand our midsized customers, especially for those quality customer size, I think that will also help with the loan yield. And at the same time, when we think that there might be further room for LPR to further cut down, but the anti-involution, we need to also take into consideration about the anti-involution policy, namely banks are having a more reasonable or on pricing. So that will also help with the stabilization of loan yield.

So taking into consideration of all the factors I mentioned above, I think that the loan yield will be trending to stabilized at a level. There will be less room for the rate to continue to go down. But for the newly disbursed loans there and for the existing loan, there's still a gap between the new one and the existing one. So that will drag down the loan yield overall. But if you look at the newly disbursed loan yield quarter-on-quarter basis, I think it's more and more returning to a reasonable level for all the banks. So this is my judgment on that.

And just now, I also mentioned that when I analyze the NIM level, that is why I think that the NIM is kind of stabilizing at the bottom range. And under this pricing environment, how can we see the return on shareholders? As I always mentioned that for return on one customer, we cannot only focus on the loan that they have, but we are -- actually, we are providing comprehensive solution service for the customer. Loan is only one part of the complete measure. So we hope that loan is kind of something that we give to the customer and then to simulate the customer can work us with us in all fronts, including investment, including other retail-related business, including wealth management-related business. So the contribution from the customer cannot purely be measured by the loan side, rather, it should be a very complete measure of the contribution from our customer.

And also I mentioned for loan growth rate, I mentioned when the macro economy is stable, our loan growth rate will be stable. But when the macro economy is under pressure. Our loan growth will also be stable. I don't want to see much volatility in the loan growth rate. Volatility means risk. So it should be in line with the total macro economy. In line with that and try to be stable and then to increase the overall contribution from the customer. And I think it's almost -- we're almost done for today's conversation. I think our friends, analysts, your questions are really, really very good questions and also invoked our thoughts on that. And also you focus -- you also care about the future trends.

So I would like to share with you some of our views on the future trends of our bank's operation. So when we look at the future, I think some are certain and some are not certain. For certainties, I think, firstly, the overall economy will continue to have a stable growth, and make steady progress like the GDP growth rate per year, 5% and also other macro datas are moving towards a better position. This is something that is certain -- under this certainty of the external environment, we are sure that our customer base, our AUM, these are the foundation of our business will make steady progress. This is also certain. So this is the first certainty I would like to say.

Second is that for asset quality, this is to control the asset quality is our pursuit, and it's something that we will always emphasize on. We will continue to make sound asset quality and maintain a prudential risk appetite. This is also the certainty of us. Just how you focus on the RWA growth rate. And many investors asked a question about that. I think you don't need to worry too much about that because RWA growth, there are many reasons, some are periodic and some are calibre reason and some are base reason. What I want to say is our risk appetite doesn't change. And also our pursuit to make a contribution to our shareholder return doesn't change. So our philosophy, our banking operation doesn't change. So you don't need to worry too much about RWA.

And also, we have maintained a relatively high CAR ratio. So for asset quality and also for capital management, this is also certain. And thirdly, the core financial indicator of CMB to maintain a leading position doesn't change. We -- namely like ROE, like the CAR ratio, like the NIM, like the fee income proportion and also like the retail business proportion in our total business portfolio, these are certain. We will continue to maintain our leading position in all these aspects.

And fourthly, I think another certainty is under this low interest rate, low fee rate environment, for banking industries for quite a long term, the banks may maintain a low net profit growth rate for quite a long period. So this is also certain. I think you cannot have unreasonable expectation, too high expectations for our bank's low profit growth rate. So I think for maintaining a relatively low profit growth rate will be stable for a bank. It's like a marathon our bank is running. It's not a short run as you need to have a stable -- as long as you have a stable growth for the -- in the long perspective, that will be a high return. So this is something that is return.

And when we look at the uncertainties we have, I think there definitely are some uncertainties we are facing with. So that is why we cannot give you a very precise prediction on some financial data. The first one is side under the certain direction of the macro situation, but the market still are facing volatilities. Like the capital market, like the foreign exchange market, there are many volatilities. And also for the bond market, the 3 markets are facing volatilities and changes like the foreign exchange market is affected by the tariff issue. There are some judgments on that, but we cannot make sure that it will be applicable for all the times.

And also capital market, definitely, people think that there will be a bullish market, but definitely, there will be volatility, and we are not sure that is establishing of a bond market. And also for the bond market, we have analyzed on that. There are many factors affecting it, and it's a normal thing for the volatility in the market. So whether -- how it will go, the market will evolve is something that is uncertain and also which definitely will bring some volatility to the profit and income of the banks. So this is uncertainty lying ahead.

And the second one is that when the overall risk is under control for some certain area of risk in certain areas or for a particular individual cases, there will be some kind of volatility. Just now you mentioned about property, some of the retail risk, we cannot say that it's time that we can stabilize or we can rebound the asset quality. But what we can say is the overall asset quality is under control, but we cannot rule out the possibility that due to some uncertain events, there may be some volatilities ahead. So these are the uncertainties we also need to face with.

And thirdly, volatilities that the monetary policy and also fiscal, we will also are changing. Definitely, these are monetary and proactive policies, but how they implement that, what instruments they will use, these are uncertain like whether they will cut the rate or whether they will cut the interest rate or whether how much fiscal investment that we'll have. So this will definitely affect the bank's NIM, bank's fee income and also bring some short-term uncertainties.

So even though with all the uncertainties, I think more are coming from the certain sides with all the factors I mentioned above, I think the most certain thing is that we will continue to focus on quality and also lay priority on profitability and to have a proper growth on scale. We are confident we are making steady progress and moving towards a better direction. So I would like to take the chance to share with you some of our views on the future trend. Thank you.

Thank you. Now it's the end of our third results conference call. If you have further questions, you can go online to see our third quarter results or if you want further explanation, you're welcome to contact us. Our IR team are always there for you. Thank you. Bye.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Dear investors, analysts, good morning. CMB 2025 interim result announcement will now begin. I am Xia Yangfang, General Manager of the Office of the Board of Directors. CMB has announced its 2025 interim results last Friday evening. Today's event is being conducted in the form of a live online webcast.

I would like to now introduce the on-site participants who are with us today. They are Mr. Wang Liang, President and CEO. Ms. Wang Ying, Executive Vice President; Mr. Peng Jiawen, Executive Vice President, CFO and Secretary of the Board of Directors; Mr. Lei Caihua, Executive Vice President; Mr. Zhou Tianhong, Chief Information Officer. We also have independent directors, Mr. Li Menggang, Mr. Liu Qiao, Mr. Tian Hongqi, Mr. Li Chaoxian, Mr. Shi Yongdong, and Ms. Li Jian to join us online. On behalf of China Merchants Bank, I would like to extend warm welcome to your participation, and thank you for your long support, interest and investment in CMB.

Today's meeting involves 2 sessions. One, Mr. Wang Liang will introduce the bank's interim results, takes around 25 minutes. The second session is the Q&A session, takes around 90 minutes. The meeting will be provided with simultaneous interpretation from Chinese to English.

Now I will give the floor to Mr. Wang Liang on the Bank's 2025 interim results.

Dear investors and analysts, good morning. Welcome to CMB's 2025 interim results presentation. Today, I will introduce 3 key areas: first, 2025 interim performance overview; second, detailed operational information; and finally, a brief introduction of our business strategies for the second half of the year. For the first half of the year, the group continued our value creation bank strategy, adhere to the concept of dynamically balanced development of quality, profitability and scale, and maintained operational indicators under steady progress with good momentum.

This was primarily reflected in the following 4 aspects. First, we achieved steady progress with leading profitability in the industry. Despite challenges such as narrowing interest rates, interest spreads and intensified competition, we responded proactively and ensured core profitability indicators showing steady and positive trends. Net operating income, RMB 169.9 billion, a year-on-year decrease of 1.73%. Net profit attributable to the bank's shareholders was RMB 74.9 billion, a year-on-year increase of 0.25%. ROAA and ROAE were 1.21% and 13.85%, respectively, remaining at industry-leading level.

NIM, net interest income, was RMB 106.08 billion, a year-on-year increase of 1.57%. Affected by declining market asset yield, ongoing shift toward term deposit and other factors, the NIM was 1.88%, decreased by 12 bps year-on-year. Noninterest income was RMB 63.8 billion, a year-on-year decrease of 6.77% with a narrow rate of decline. Net fee and commission income reached RMB 37.6 billion, a year-on-year decrease of 1.89%. Notably, wealth management fee and commission income reversed the downward trend since 2022, up by 11.89% year-on-year. Affected by the changes of market interest rate, other net noninterest income was RMB 26.2 billion, a year-on-year decrease of 12.97%. We enhanced management on cost and expense with cost-to-income ratio remaining stable at 30.11%.

Second, we realized appropriate asset growth with significant decrease in funding cost. We responded actively to the challenge brought by insufficient credit demand, took various measures to maintain stable asset growth and optimize the structure of asset allocation. Total asset amounted to RMB 12.66 trillion, an increase of 4.16%. We continue to foster steady loan growth. Total loans and advances amounted to RMB 7.12 trillion, up by 3.31%, accounting for 56.23% of total. Among them, general loans were RMB 6.77 trillion, up by 3.99%.

In response to the trend of interest rate changes, we made rational allocation of investment assets. Total investment securities and other financial assets grew by 7.22% compared with the end of the previous year and accounting for 31.39% of total assets, an increase of 0.89 percentage points from the end of the previous year.

We continue to grow core deposits and further reduce the liability cost. Total liabilities amounted to RMB 11.36 trillion, an increase of 4.05%. Among them, total deposits from customers were RMB 9.42 trillion, an increase of 3.58%. Average daily balance of core deposits was RMB 7.61 trillion, increased by 7.77% and accounted for 87.36% of the balance of deposits from customer. Demand deposits accounted for 49.72% of total deposits, a decrease of 0.62 percentage points. Annualized average cost rate of interest-bearing liabilities were 1.35%, a year-on-year decrease of 37 bps. Among them, average cost rate of customer deposits was 1.26%, a year-on-year decrease of 34 bps, maintaining advantages in low funding costs.

Third, we sustained sound revenue mix and leading capital strength. We continue to optimize business and revenue structure with a stable value contribution from retail business and steady share of noninterest income. Retail loans accounted for 51.68% of the group's total loans, a decrease of 1.23 percentage points. Net operating income from retail business accounted for 56.6% of the total, representing a year-on-year increase of 1.12 percentage points. Pretax profit from retail business accounted for 58%, a year-on-year increase of 1.42 percentage points. Net noninterest income accounted for 37.57% of total net operating income.

Influenced by the annual cash dividend distribution, the capital adequacy ratio experienced a slight decline. Among them, CET1 CAR, Tier 1 CAR and the CAR under the advanced measurement approach were 14%, 17.07% and 18.56%, respectively, decreased by 0.86, 0.41 and 0.49 percentage points as compared with the end of the previous year. The CET1 CAR, Tier 1 CAR, and CAR under the weighted approach were 11.92%, 14.53% and 15.61%, respectively, decreased by 0.51, 0.1, and 0.12 percentage points.

Fourth, we maintained stable asset quality and strong risk compensation capability. NPL balance was RMB 66.3 billion, an increase of RMB 760 million. NPL ratio was 0.93%, a decrease of 0.02 percentage points. Annualized credit cost ratio was 0.67%, a year-on-year decrease of 0.1 percentage points. Allowance coverage ratio was 410.93%, a decrease of 1.05 percentage points. The loan loss reserve ratio was 3.83%, a slight decrease of 0.09 percentage points, both remaining a leading position in the industry. The ratio of NPL to loans overdue for more than 60 days was 1.12. Annualized NPL formation ratio was 0.98%, a year-on-year decrease of 0.04 percentage points.

The above provides a brief overview of our performance in the first half of 2025. We will now turn to the company's operational information. In the first half of the year, the bank actively responded to the challenges of the low interest rate environment. We continue to optimize our business structure, consolidate our competitive edges and forge new growth drivers, mainly reflected in the following 5 areas. Thus, we deepened client relationship and expanded client base.

Our retail customer totaled 216 million, an increase of 2.86%. Among them, number of Golden Sunflower level and above customers totaled 5.63 million, an increase of 7.7%. Number of customers holding our WMP reached 61.07 million, an increase of 4.9%. Number of active credit card users totaled 69.63 million, an increase of 0.28%. Corporate customer totaled 3.36 million, representing an increase of 6.36%. Among them, number of newly acquired was 305,100, and Sci-Tech enterprise customers reached 169,700, an increase of 4.43%. Corporate customer for withholding transaction reached 1.33 million, a year-on-year increase of 12.12%.

Second, we forged distinctive business features and achieved differentiated competitive edges. First of all, retail finance sector focused on customer need for deposit loans and payments, continued to enrich product supply and deepen customer management, further consolidating the systematic advantages of retail business. Retail AUM scale exceeded RMB 16 trillion, representing an increase of 7.39%. The increment for the first half of 2025 reached RMB 1.1 trillion, hitting a record high. Retail customer deposit balance was RMB 4.25 trillion, an increase of 5.43%, accounting for 45.13% of total deposits from customers, an increase of 0.79 percentage points.

In the context of weak credit demand from the residents, we took multiple measures to drive the growth of retail loans. Retail loan balance was RMB 3.68 trillion, an increase of 0.92%. We adhere to the stable and low volatile operational strategy in credit card business. The credit card transaction value reached RMB 2.02 trillion, down by 8.54% year-on-year, maintaining a leading position in the industry. Secondly, the corporate finance sector focused on key areas and continued to build distinctive financial advantages. The balance of the FPA to corporate customer was RMB 6.45 trillion, an increase of RMB 395 billion over the beginning of the year.

In line with the direction of the country's industrial transformation upgrading, we adjust the structure of SF business to support the high-quality development of the real economy. The growth rates of loans in key areas such as technology, green industry and manufacturing were significantly higher than the average growth rate of the company's loans.

We vigorously promote the characteristic and professional development of pension finance. Cumulative number of individual pension accounts opened by the bank exceeded 13 million with a deposit balance ranking among the top in the market. Pension funds under custody amounted to RMB 1.41 trillion. We continue to upgrade the distinctive brand of intelligence and digital corporate finance. Number of customers using treasury management cloud service reached 709,200, an increase of 15%. Domestic trade finance business volume was RMB 792.6 billion, a year-on-year increase of 20.64%.

Thirdly, investment banking and financial market sector continued to build its strength in segmented areas and its business competitiveness grew steadily. In terms of investment banking business, debt financing instruments with the bank as the lead underwriter amounted to RMB 274.29 billion, maintaining market #1 position in the underwriting scale of perpetual bonds and Sci-Tech Innovation bonds.

M&A financing business represent a year-on-year increase of 27% with several major projects with market influence successfully executed. In terms of financial market business, the number of wholesale customers involved in client flow trading was 66,500, a year-on-year increase of 14%. The transaction volume of client flow trading of wholesale customer amounted to USD 159.1 billion, a year-on-year increase of 25%.

In terms of bill business, we deepened the transformation to provide comprehensive services to bill customer. Direct bill discounting business volume was RMB 1.39 trillion, a year-on-year increase of 4.86%, ranking second in the market. In terms of FI business, we expand the source of low-cost liabilities. The average daily balance of FI demand deposit was RMB 753 billion, accounting for 93% of the total increase by 32%. The cost ratio of FI deposit was 1.06%, a decrease of 25 bps.

Fourthly, the wealth management and asset management business accelerate development and further enhance professional capabilities. Wealth management business realized rapid growth. Retail WMP balance increased by 8.84%. Even though the volume of agency sales of non-money market mutual fund decreased by 7.84% year-on-year, but we see more allocation towards equity-related products. The sales volume of agency distribution of trust schemes and the insurance premium increased by 175.24% and 32.77%, respectively.

The number of customers who conduct asset allocation under the TREE system reached 11.3 million, an increase of 9.17%. The average daily balance of corporate WMP was RMB 459.05 billion, an increase of 14.8%. Scale of asset management business amounted to RMB 4.45 trillion, remaining stable. The balance of assets under custody was RMB 24.14 trillion, an increase of 5.96%.

Fifthly, we implemented regional development strategy and enhanced development capabilities in key regions. We focused on national strategies of coordinating regional development, follow the trend of industrial cluster development and promoted the branches located in the Yangtze River Delta, the Pearl River Delta, Chengdu-Chongqing Region, the Western Taiwan Straits Economic Zone and other regions to further develop. Customer base AUM from retail customer, core deposits and other indicators all showed higher growth rate than those of the average level of domestic branches as compared with the end of the previous year. Their contribution within the bank was continuously increasing and the core deposits and the balance of loans of the company's 16 branches in key regions as a percentage of all branches increased by 0.43 and 0.22 percentage points, respectively.

Third, we enhanced development and productivity of global and integrated operation. For overseas business, we seize opportunities, maintain stable and sound operation and improve the level of internationalization in institutions, businesses, talents and management. The total assets of overseas institutions increased by 6.56%. Net operating income rose by 23.72% year-on-year. Among them, institutions in Hong Kong seized the opportunities of the continuous recovery of the Hong Kong capital market, achieved significant growth in business scale and value contribution. Their total assets increased by 9.49% and net operating income grew by 25.28% year-on-year. The AUM from retail customers of CMB Wing Lung Bank rose by 16.51% and CMB International ranked #1 in Hong Kong by the number of IPO underwriting in the first half.

Cross-border business accelerated to develop corporate customer in respect of international BOP reached 78,600 and the volume amounted to USD 222.63 billion. We improved comprehensive layout, enhanced development quality and efficiency of subsidiaries and JVs and provided comprehensive services to clients. Total assets of major subsidiaries reached RMB 932.09 billion, up by 9%, and their net operating income accounted for 12.54% of the group's total net operating income, up by 2.92 percentage points year-on-year.

Total assets of CMB Financial Leasing reached RMB 328 billion, up by 6.19%. Balance of WMP of CMB Wealth Management was RMB 2.46 trillion, decreased by 0.4%, remaining #1 in the industry. The scale of mutual funds under management of China Merchants Fund amounted to RMB 896.6 billion, an increase of 1.93%. The scale of entrusted management of insurance fund of CIGNA and CMAM was RMB 214 billion, an increase of 12.85%. We were also approved to prepare for the establishment of CMB Financial as an investment management -- investment company, marking a new breakthrough in our integrated business layout.

Fourth, we accelerate digital and intelligent transformation and strengthen technology advantages. We innovate technology at the foundation level and strengthen model performance and computing efficiency to establish easy-to-use and fast integrating enterprise-level AI middle office. We implement large-scale AI models across 184 scenarios in retail, corporate risk control, operation and other areas, effectively improved business efficiency and customer service, moving towards the digital intelligence stage.

We leveraged large model to enhance the intelligent service level of the intelligent wealth assistant, Xiao Zhao, initially establishing the corporate intelligent assistant, AI Xiao Zhao, to assist customers in handling complicated operations of the corporate financial products. Accelerating towards intelligent internal operations and management by implementing an AI-first strategy, we fully advanced AI application and introduced assistance across multiple areas, including retail, corporate risk and compliance, operation and IT development, saving a total of 4.75 million working hours for the bank's management.

Fifth, we enhanced comprehensive risk management and maintained stable asset quality. We promoted comprehensive risk management, closely monitoring market changes, stepped up efforts to control risks in key sectors, enhanced internal control and compliance management level, firmly maintaining fortress-style risk and compliance management system and uphold the bottom line of risk management.

Corporate loan NPL ratio was 0.93%, down 0.13 percentage points as compared with the end of the previous year. Property industry NPL was 4.74%, down 0.2 ppts. Manufacturing industry NPL ratio was 0.44%, down 0.05 percentage points. Retail loan NPL ratio was 1.03%, up 0.07 percentage points as compared with the end of the previous year. Mortgage NPL ratio was 0.46%, down 0.02 percentage points. Credit card NPL ratio was 1.75%, same as that at the end of the previous year. Microfinance and consumer NPL ratio was 0.95% and 1.41%, respectively, up 0.16 and 0.37 percentage points as compared with the end of the previous year, maintaining a relatively excellent level in the industry.

Finally, I will give a brief introduction to the business strategy for the second half of 2025. Looking ahead to the second half, the external environment remains complicated with both challenges and opportunities for the banking industry. On one hand, the banking industry continues to face the challenges of low interest rate, low interest spread, low fee rates and intensified homogeneous competition and its overall operation are still under pressure.

On the other hand, China's economy continued to maintain a momentum of recovery, providing a sound operating environment for the banking industry. In the second half, the group will further advance its value creation bank strategy, adhere to the coordinated development of quality, profitability and scale, accelerate the transformation towards internationalization, comprehensive operation, differentiation and digital and intelligent development, steadfastly pursue a growth-driven development model of strict management and upholding fundamental principle while breaking new ground.

First, we will consolidate business foundation and enhance refined management practice. We'll continue to grow and optimize our customer base. We will also strengthen asset and liability management and enhance the efforts to obtain high-quality liability and asset origination so as to maintain our NIM advantage, promote the restorative growth of noninterest income related business. We will also enhance cost management, establish and improve input/output in valuation system, optimize resource allocation and continue to promote cost reduction and efficiency enhancement.

Second, we pursue differentiated development to expand core competitive advantages. We will secure the dominant position of retail finance, consolidate and enhance the systematic strength of our retail finance business and leverage the recovery of the capital market. We will seize opportunities to accelerate the transformation and upgrading of our wealth management business, strengthen core capabilities, addressing weaknesses. At the same time, we will build up our market share in key regions, key areas and key business, cultivate new advantages in niche segments using targeted breakthroughs to drive overall competitiveness.

Third, we will enhance global and integrated operation capabilities. On one hand, we will continue to improve the quality and efficiency of overseas institutions, particularly those in Hong Kong, while increasing the share of overseas cross-border and FX business. On the other hand, we will capitalize on our full spectrum of financial licenses and broad business presence to strengthen collaboration, integrate resource and enhance both comprehensive customer service capability and income diversification.

Fourth, we will foster innovation-driven growth and accelerate to construct digital and intelligent CMB. We will seize the opportunity brought by AI development, strengthen technology infrastructure and lay a solid foundation for innovation in the AI era. We will build leading knowledge and data capabilities to establish clear advantages and to shape an AI-driven innovation ecosystem and continue our exploration in a human plus digital intelligence model.

Fifth, uphold disciplines and strengthen comprehensive risk management. We will adhere to a prudent and sound risk culture, enhance risk assessment and continue to prevent and resolve risk in key areas. We will step up efforts in the collection and disposal of NP assets to ensure asset quality remains stable, and we will maintain strict control over credit, market liquidity and operational risks, while reinforce anti-money laundering and compliance management, thereby providing a solid support for sustainable development.

The above mentioned is our strategy for the next half.

Thank you, President Wang. For the next session, we will enter into the Q&A session. Please follow the instructions given by the operator. And please state your name and the institution you represent before you raise the question. Now we will enter into the Q&A session.

[Operator Instructions] The first question will come from Citic Securities, Ms. Xiao Feifei.

I'm the chief researcher in Citic Securities currently. Congratulations for CMB's first half results, especially we have made a positive profit growth in the first half and brought us much confidence in the bank's operation. So my question is for Mr. Wang Liang. We're seeing now there are some positive trends in the market like the warming capital markets. And my question is whether CMB can continue to have this positive growth trend in the second half?

Thank you for your question. After we released our results last Friday, many investors and many analysts are writing articles about our performance in the first half and also have given us judgment and also confirmation and also suggestions for our operation. I think we truly accept all the advices and suggestions and also absorb these kind of suggestions to our operation. And just now you said that in the first half, we have recorded a positive profit growth. Whether we can continue this trend in the second half? From my point of view, I think in the first quarter, we are facing very big pressure because from the 1st January, we were facing LPR repricing, which means that there will be a higher pressure on our NIM contraction and which also have a big pressure on our total operating income. And in the second quarter, we think that the second quarter's performance is better than the first quarter.

And we think in third quarter and the second half, we believe that we will be able to have made steady progress and trending towards a better situation in the first second half. And in the second half, I think we will continue to implement our strategy and also requirements from the Board, especially under this environment, especially with the contracting NIM and also the lowering of the interest rate environment, we will continue to balance our business development among different business lines and also better manage cost control and also to concentrate our resources in major areas and to improve our wealth and other fee-based income and also better manage the risk and also asset quality. With all these measures taken, we have the confidence to continue to make steady progress in the second half and to reach our budget goal, which was made at the beginning of the year.

Second question, please.

Second question is from Mr. Zhang Shuaishuai from CICC.

My question is for retail banking. I think that it's quite an important period for retail banking. And I think there is less talk about retail restructuring, and we are seeing higher risk in terms of risks on retail side. So my question is, will retail continue to be a major strategy of the bank? And how will you carry out the retail strategy? Secondly, when we look at the retail operation, I think that you have quite stable retail assets, and now we are seeing improving wealth management. So looking forward, how can you expand your advantage in retail banking? And what are the specific measures that you would like to take?

This question is for Mr. Wang -- Ms. Wang.

Thank you for your question. I think there are some difficulties and challenges facing the development of retail banking, but we do have some development in the recent years, especially we have higher growth on customer and also on the AUM side. In first half, we have reported a record high AUM growth. And also, we are seeing higher growth on the wealth management fee income as well.

And there are 3 major aspects areas that we have been working on in the following years. The first one is that we are focusing on major areas like the deposit and also settlement and clearing. We are laying more emphasis on settlement and clearing, including credit card and also debit card, and trying to be the prime bank of our customer and to innovate our settlement and clearing business and to build an ecosystem for our settlement environment and to make it easier and also more convenient for customers to use the cards of CMB. And we think that settlement and clearing is the most basic banking service that we can provide for our customers. So providing a more convenient banking account and also related services to our customer is our top priority in the last few years.

Secondly, we used 1.5 years kind of to build up and also to upgrade our People + AI and technology service model and to optimize our team building and also to empower our team with technology. So we think that new productivity is very important to service this new environment. And our advantage for us is to reorganize our resources for retail banking to meet up the new requirements in the new environment. So we call it that People + technology. So this strategy is not only a goal we're laying behind, but it's rather something that we are implementing already. And we have already shifted to the new people plus manual power plus technology model. So the results have been shown in our operating income, in our profit growth as well. So in the future, we think we will benefit more from this kind of strategy upgrading.

And thirdly is that apply AI into retail banking. I think it's the best scenario that AI can be applied and we're focused on AI assistant, namely AI Xiao Zhao for our retail banking, and we have achieved quite positive results. And our assistants are servicing more than 200 million customers and also AI assistants are servicing all of our retail relationship managers and the mid and back office employees and also help us to improve efficiency. And we are also going to optimize our business structure and also embed AI assistant, embed this kind of AI colleagues into our whole system. And our employees will help to nurture this kind of AI assistant, so which means that the business will be led by our relationship manager, will be led by the people and that will be assisted by the AI assistant.

I think for retail banking, very important 3 pillars. The first one is technology. Technology is the most important thing for the advancement of the retail banking. And CMB's technology is very highly integrated with our business and our technology fully understands the business, so that we can provide a series of innovations, including All-in-one Card, All-in-one Net, which have led the industry in the past. Second pillar is the team. Our team is very important. It doesn't mean only the team from retail banking, but also team from our other business units. It's like Mr. Wang Liang said that in China Merchants Bank, everyone talks about retail, everyone does the retail business and it's kind of a common goal for the CMB.

And thirdly is our philosophy to creating value of our customer. It's not only some slogan on the wall, rather, it's embedded in everyone's mind and everyone's choices, and also implement this philosophy in our day-to-day practice. So we think that the enterprise can win at the end, that is enterprise can implement a philosophy. And fourthly, I think determination to implement this retail strategy is very important. And I think there are many -- always some questioning from the outside world, including a third-party payment and also fee rate cut, which also questioning our capability in wealth management.

Currently, we are seeing degrading of the consumption and also there are many challenges for our credit card business as well as settlement business. And facing all the challenges, well, our retail banking continue to grow. And from quarter-to-quarter, yes, we do have challenges, including interest income, including fee-based income and also payment-related income, but we didn't give up any hope or give up any business. Rather, we seized opportunities in good times and also to consolidate our business foundation in bad times.

So I think no matter all kinds of customers, all class of customers, and also all kinds of business, including wealth management, private banking, basic banking, we are very firm now and also stick to our strategy and also look back at what we have done right and what we have done wrong. So I do hope that analysts and also shareholders will more focus on the business foundation of CMB, whether we can control the risk, whether we are still market oriented, whether we continue to be innovative or we continue to develop technology. These are more important rather than Q-to-Q results. Thank you.

Next investor, please.

Next investor (sic) [ question ] is from Katherine Lei from JPMorgan.

My question is about NIM trend. Recently, about the repricing of the deposit and also loan and also the launch of the involution policy. So how it will help with the bank's NIM? And thirdly, from deposit side, my question is about the daily average demand deposit, whether it's affected by the capital market and whether do you have a higher demand deposit proportion? And do you have further room to reduce your cost of funding? And looking in the future, if continued we have semestric rate cut, so how are you looking forward to a stabilization of the NIM?

And the question is for Mr. Peng.

Thank you. I think that after we released the semiannual report, I think NIM is quite a focus of all the investors. And I also saw some of your reports. I know you understand the current interest rate environment, but also I think there is some hope that you hope we can reduce the contraction level of our NIM. So today, I would like to share some of our views on -- my views on NIM.

So 3 major aspects. The first one is that in absolute amount, we are leading the industry in terms of absolute NIM level. And secondly, we face pressure. And thirdly, I think that is controllable NIM contraction. Firstly, in absolute amount, our NIM is 1.88%. And from an average banking industry level, it's around 1.42%. So we are 46 bps higher than the industry average level. And as far as we know that we are the best one in the industry. So this is absolute leading in NIM number.

And secondly, but still, we are facing pressure on NIM side because it's related to our own business features. Definitely, we have some common pressures with the industry, but we also do have some specific and our own distinct reasons. Like the common things are like that the asset yield are all coming down and the level of the decrease on asset side is higher on the decrease on the cost side. But CMB has something different than other banks. Like the first one, in terms of the deposit cost, there will be less room for CMB to reduce the deposit costs and higher pressure. It's quite easy to understand because our deposit cost is already very low. It's 1.26%. It's far lower than our peers. So against this background, I think that the room for us to further go down will be less than our peers.

And also, we have the highest demand deposit proportion, which means that the room for us to continue to raise the -- cut down the deposit cost is less. So now the demand deposit rate is 0.05%, which means there will be only 5 bps down if we go to 0. And secondly, for a very long time, we have a very strict control on high-cost deposit. We have taken different measures to make sure that we have a lower proportion of the high-cost deposit. So the room for us to further lower down to the demand deposit cost will be lower than the peers.

Thirdly, and also from the loan perspective, as we can see mortgage loan last year, especially this year, we are seeing repricing of the mortgage loan, and the back book of the mortgage loan has quite a big impact on us, because we have one of the highest proportion of mortgage loan, and this is also something that's different from other banks. And also from the asset structure, which makes us see more pressure on that because we have a higher proportion of retail assets, over 50%. And retail assets especially have a higher yield, especially like credit card. But if we are facing less growth on retail side, definitely we will have some negative impact on our asset structure, which will lead to a lower yield, like the credit card is down by RMB 23 billion compared to the end of last year, and this is mainly because there's less demand on that.

And this is the same situation with the industry. That is why these are specific reasons for CMB, that is why we are facing more pressure on the NIM side. So these are the areas that we need to further analyze how we can conquer the challenges from the external environment to continue to maintain a sound NIM level. And thirdly, my judgment for future. I think that the future will be under control. Overall speaking, I think even though facing pressure, but we do have some beneficial environment, like the one thing is we think the external environment, there are more policies has been carried out to stimulate the consumption, which definitely will be beneficial to the development of our retail loan and also credit card loan, like the PDOC are focusing more on the NIM level of the banking industry. And as you can see, there's a close relationship between when they are cutting semestric rate cut on both asset side and also liability side. So this will also help to release the burden on the NIM side.

And thirdly is the involution policy is also applicable to the banking industry, which will deal with the irrational competition among the banking industry. These are more favorable to the bank's operation. And from CMB ourselves, we also took the measures like we're stepping up to absorb more high-quality demand deposit and also high-quality low-cost deposit as well. Just now you also mentioned the proportion of demand/deposit ratio, whether it will be affected by the capital market. And I think currently, when we look at the deposit, there's a kind of a quasi-bull market. There's a bull market in the capital market. It definitely has diverged some of the deposits to other wealth management-related products.

But I think at the same time, we have a broader definition about the deposit, deposit from nonfinancial institutions, including our deposits relating to custodian business and deposits relating to capital market, like the deposits coming from our financial institutions, counterparties are growing like 33% higher than before. It means that even though there will be a divergence from the deposit, but the funding is still there. It means that the funding -- deposits from customers are going to the capital market, but then you return back from the financial institutions. So internally, we have a broader definition about deposits, including customer deposits, including the financial institutions. Now the deposit cost for our FI is about 1.09% and the demand/deposit ratio is around 97%. So it's also a high-quality deposit. So no matter what the nature of the deposit is, as long as the cost is low, then that will also be a very good funding source.

And thirdly, I think from the asset side, we will also make efforts in terms of asset origination, including corporate and also including retail banking, especially the retail banking as a focus. like credit card, like the micro and consumption loan and also mortgage loan, we are making efforts on all these fronts, trying to originate more loans in this area. And also at the same time, for risk pricing capability, this is further to be improved. This is also a very important kind of difficulty that we are facing. And fourthly, I think very important, how we can better manage the asset and liability management, especially for the multi-asset allocation. So by these measures to improve our NIM level.

And I think overall speaking, I think NIM is leading around 46% higher than the market -- the industry level. We hope that the level of the contraction will be quite the same of the large-sized enterprises. We think it's already a harder result by all the measures as I mentioned just now. We do hope that we can maintain something. But from sequentially looking at, we think that NIM will still be facing downward pressure. But on a year-on-year basis, we think that the contraction level will be smaller than before.

Next question is from China Securities, Mr. Ma Kunpeng.

Following the past question, talking about the anti-involution policy. So recently, investors are focusing more on anti-involution, and they will compare it with the 2017 supply side reform. I would like to understand the difference and similarities between the two. I would like to understand the view from the CMB senior management. For the last time's supply side reform, it indeed contributed to the bank's performance as well as NIM. So I would also like to understand further about that after the anti-involution period, what changes will be happening towards our NIM and our development? Could you provide further outlook on our asset quality indicators such as NPL ratio and et cetera?

Thank you for your question. According to the center's arrangement, in different industries, there are many arrangements relevant to the anti-involution policy. Many enterprises, they have seen disorder in the market due to price competition. This is not good to the sustainable development of the market. How to reverse this vicious competition and bring back healthy competition to the market? This is what the market and also our regulators have been doing. So in my opinion, whether this time, the entire evolution arrangement compared with the 2017 supply side reform, there are some similarities, but there are also some difficulty.

First of all, in terms of the industry level, the industries causing overcapacity is different. For instance, the new 3 industries, there are some phenomena relevant to overcapacity and these bring the fierce competition in the market. And to the enterprise level, for the past time, there are some zombie enterprises. And for some provincial level, there are some enterprises that are from low end. These are the past round of supply side reforms major market player. But for this time, the major market players in this round of anti-involution are innovative enterprises that are from the private sector. This is quite different from the last time.

So for the methodology taken this time, it's also different from that of the year 2017. I believe that this time, we could be taking various measures to bring orderly market regulation back to the industries. And for the banks, we believe this can also bring healthy environment to the banking industry to better control asset quality. And for the banking industry itself, we have been also conducting anti-involution arrangement within our own industry. On one hand, we see some over competition among our banking peers. For instance, the loan pricing, bond investment, the fee rates.

Well, for some business cases, people will sacrifice prices to compete for winning the business. So this will bring the uptick in the risk level. So for CMB's perspective, we will support our regulators and other government bodies to promote the anti-involution arrangement and act according to the current requirement and to prevent and to provide a sustainable development of the industry back within the banking industry and realize the sustainable development within the commercial principle. We will embed this within our mind.

And I think it is good to the bank itself to stabilize its loan and deposit pricing and et cetera, and it can also improve our asset quality. And these can all contribute to our future asset quality and our cost management. I believe that under such macroeconomic situation, and also the guidance of the banking industry to better support the real economy, combining all these factors together, we believe this guidance provided from the policy itself, the bank should seize the opportunity and strengthen self-discipline and maintain good risk management and stabilize our asset quality as well as the NIM to realize a sustainable and healthy development.

Thank you, President Wang. We will have the next question.

The next question is from Xu Ran from Morgan Stanley.

I have a question regarding corporate finance. I understand retail has been China Merchants Bank's characteristic, but I would like to also learn something about the corporate finance. I understand that you have been managing a good risk control in the corporate business. How do you seize to develop in a differentiated way in the corporate business? We see the recovery in the capital market. What kind of opportunity will it bring to the corporate banking business? And under the backdrop of anti-involution, will there be more opportunities coming from M&A and restructuring? Will there be any new opportunities and also loan business for CMB?

Thank you for your question. Mr. Lei, who is just back to the head office, in charge of corporate finance business.

Thank you. For CMB's wholesale business, we have always sticked to the differentiated development methodology, and there are several features. Compared to our peers, we have already established quite qualified customer base compared with our peers. Our aggregate corporate customer was 3.36 million. We have high level of Sci-Tech enterprises, which takes around 20% of our total customers, especially in manufacturing top players, we have already covered 80% of our total. And for the SME top players, we have covered over 30% of these type of enterprises.

For listed companies, for those capital market-related enterprises, we have already covered over 86% of them. Especially for those PE invested-related enterprises, there are around 190,000. Our coverage has already surpassed 59%. So with such good quality and large customer base, this is one of our greatest feature.

The second part is we have a unique FPA perspective. We provide comprehensive financing to our clients. This is what we have been doing for the past 15 years. It is a unique perspective of operation to provide various financing channel for our clients. And on the second hand, we could create win-win situation to our partners, relying on comprehensive service capabilities among our total financing, this is RMB 6.42 trillion, and among them, nontraditional financing accounting for 41.4%.

And third is that what we rely on technology to provide transaction banking business to our clients, we have maintained a leading position. We have provided 8,800 groups to provide 380,000 enterprises below them to provide account service for them. We realized a year-on-year growth of 30%. And we have also provided the treasury management cloud service, our flagship solution to our client, which we have realized over 20% growth year-on-year.

Our custody service, RMB 1 trillion level business, maintained top 3 player in the market. Our supply finance, supply chain finance business also maintained top in the market. The fourth is that we have enhanced our advantages in cross-border business and provide services to enterprises going global. For loans granted to nonresidents, which for the first half has surpassed RMB 200 billion, a year-on-year increase of 20%. For FX business, a year-on-year increase of 36% have been secured.

For enterprises, who has international business demand, we have connected them to over 100 representative banks to provide further services to them. And for the fifth perspective, we have provided investment banking and commercial banking services, integrated service to our clients. We have these capabilities to establish the friend circle to build up an ecosystem to provide services to these clients.

And third, we have the product metrics to provide investment banking and commercial banking business to this type of clients. For instance, in the bond underwriting business, we have always secured a top 3 position in the market. In terms of the Sci-Tech bond, our underwriting scale has ranked #1 in the market. For the M&A business, we have maintained a 27% year-on-year growth in the first half of the year.

For the listed companies, clients, they have been the targeted group, the prioritized group reserve in the investment banking and commercial banking integrated service. We have a special indicator that measure the accounts that we covered. For those we raised funds for pre-IPO clients, we have maintained a leading position in this area. For the first half of the year, in Asia listed companies, their fundraising accounts, we have covered for nearly 50% of these business. So I use the above 3 perspectives to describe our features of CMB's corporate finance business.

Of course, we are faced with competition and challenges such as anti-involution environment, the fierce price competition in loan pricing and deposit pricing. I have to admit these challenges existed. For a long run, CMB always make a balance between quantity and quality and obtain the principle to develop business under a controlled risk level. Our corporate business NPL formation ratio was lower than 0.2% for the first half. So for the next step, corporate asset origination becomes one of our top priority in our business. We will enhance our capabilities in this field, and we will focus on the following 4 aspects.

The first one is Sci-Tech enterprises, including the upgrading of traditional enterprises, the new equipment enterprises and these opportunities brought by the 2 types of clients. And second is the integrating and M&A opportunities arising from the capital market. These we have also seen accelerated pace in the market. We have been quite active in providing such kind of services to the clients. And third is that to provide supply chain finance services to the clients. And the fourth, how to better integrate the transformation of digital infrastructure to provide better services in inclusive finance sector.

The region that we grant inclusive finance loans are mostly concentrated in the Yangtze River Delta, Pearl River Delta and also the Bohai Rim. The 3 regions account for 80% of the loan increments. The industries are mostly on manufacturing, leasing and commercial service and also electricity, heating and gas and water industry -- water generation industry. The full direction, as stipulated by President Wang, that will serve in the future direction of our development and will contribute better to our return that we aim to bring to the shareholders and investors of the bank.

We will have the next question.

The next question is from [ Judy ] Zhang from Citi.

I have a question regarding retail. We see from many banks that the retail asset actually worsened in its asset quality since quarter 2. And when can you see the peak of the NPL performance of assets in the retail sector? So after we see some interest subsidy policy introduced for the retail loan, will you adjust your KPI to encourage consumer loan? Do you see any improvement in the demand? How do you prevent the fund to flow to the arbitrage? And for instance, in the equity market or early repayment of mortgage, how do you control the risk in this type of asset?

So for the whole industry, we do see challenges in the risks from retail assets, which are reflected by many areas. So influenced by the slow economic growth and the downward trend in the property market and also the declining income of the residents, the retail credit assets are also influenced by these factors, which is following the same trend with the environment. We also see some uptick risk in our retail sector. On the one hand, this is because of the external environment. On the other hand, it is because of our own risk control. We tend to be more prudent in terms of the retail asset quality, even though our risk indicators are seeing some uptick, for instance, the NPL ratio, the special mention loan ratio. But for the absolute level, we are still maintaining in quite good compared with our peers.

To answer your question regarding the retail credit risks, what's our view on the future development trend. We divide the retail credit into 2 parts within the bank. One part is retail credit. On the other hand, it's retail asset with credit card. In our opinion, the trend, we don't see any turning point from our perspective. For the credit card customers, the risks are in a more bottom level. And for us, we can see it as an early warning indicator. We have to conduct an analysis. For the credit card business, the NPL ratio has shown its increasing trend since 2019. Along with the pandemic influence, there are significant increase across the market. And from then till now, it has been 6 years.

Only in the year 2021, we have seen some improvement. But for the rest of the years, the credit card business across the market, the NPL ratio is always in a downward trend without seeing any turning point. So you can see from the credit card business to the whole credit -- to the whole business of retail. We should say that the risk is still in the process of exposing the decreasing pricing of the mortgages and some other influencing factors. These risk factors are combining with each other. This is the bank's overview -- the bank's view over the market.

How do we deal with the relationship between development and risks? We need to maintain a proactive attitude. Retail credit business plus credit card business, it accounts for over 50% of the bank's loan. It's a cornerstone of our business. We need to enhance our capability and explore more potential to grow, to satisfy the need of customers' demand and to promote the high-quality development of credit business of retail. But on the other hand, we need to be highly cautious to balance the quality, profitability and scale development. This is our philosophy, and the quality has been the first and foremost prioritized that we pay special attention to.

The bank's credit card NPL ratio in 2019 and in 2020 all showed increased trend. But in the year 2021, we take early measures of low volatile and steady philosophy. So even though there are some uptick in the credit card business asset quality in the whole banking industry, but for CMB, our NPL ratio and NPL formation ratio still remain stable and maintain the best in asset quality in the industry. So for retail credit business, as one of the players in the market, we cannot go against the trend of the market. We see some increase in the risk in the retail asset business, and there are still some trends continuing to increase, but overall, the asset quality is stable.

Where does our confidence come from? First of all, our risk culture is prudent and stable. We have good customer. We have good collateral. And we have 90% of our clients coming from these good businesses. And for those retail businesses with collateral, there are over 80% of them. And we see very good safe cushion for this business. And third, we have the confidence because in the short or in the mid- to short run, we have paid special attention to the risks, but we see that the China's economy is going in a good momentum. It is recovering. And since this year, the central government has launched several policies such as interest subsidies and other policies. So I think that the recovery of the economy and the positive momentum will continue to contribute to our retail credit business.

In the future, we believe that the environment for the bank to operate retail business will be improved and the bank will be transformed from pure price competition to the competition that takes service at the center, that takes technology capability at the center. So in safeguarding our bottom line of risks, we will make sure that our asset quality to maintain at the top level of our peers. We will continue to position us with retail finance as dominant role and to guarantee their role as a cornerstone to the contribution of our loan in the overall arrangement. Thank you.

Next question is from Ma Tingting.

I'm from Guosheng Securities, Ma Tingting. My question is for fee-based income. Just now we noticed that in the first half, we are seeing less decline on the fee-based income in the first half of CMB. And how do you look forward in the second half? And secondly, I think that there is a drag from the payment-related fee-based income. So whether it's because you are controlling the risk and whether it's because of more fierce competition from the third-party payment parties. And another thing is that for credit card business, we have seen that the regulator have lowered down the credit card loan pricing. So how would CMB adjust your credit card business, and when it will be better?

So for fee-based income will be answered by Mr. Peng, and also for credit card business will be answered by Ms. Wang.

Thank you for your question. As for fee-based income, I think fee-based income is a very important component of the noninterest income. Noninterest income, including fee-based income and other noninterest income. So I will share my views on these 2 parts. For fee-based income, the highlight of the first half is the wealth management fee income for 3 years, the first time to have a positive growth around 12%, so over 11%. So this is the biggest highlight of the first half, including agency sales of the wealth management, agency sales of trust products, agency sales of the mutual funds are all growing. But for agency sales of the insurance, we have seen growing amount -- volume, but the fee-based income is coming down. This is mainly because of the mix, the structure of our insurance is changing. And many of them are coming from commercial retirement.

The fee coming from this kind of insurance fee will be realized year-by-year rather than it's not a onetime fee income. So I just want to assure you to have confidence in the future growth on our insurance fee income. And also, we are seeing quite good momentum in the custodian business contributing to the total growth of the fee income. But also, we are facing pressure on fee-based income. The biggest pressure is from our credit card. I think it's highly related to the transaction of the credit card.

In the first half, transaction volume has reached RMB 2 trillion. Compared to last year, year-on-year is a decrease of 8%. But our market share of the transaction value is increasing by 0.3 percentage points. So it's mainly affected by the weak consumption environment. So it's highly related to that. And at the same time, our credit card fee income is down by 16%. But the customers are where the transactions are growing. It means that per transaction ticket is coming down, which is the main reason of the decrease in the total transaction value and also the main reason behind the decline of the credit card fee income. And credit card fee income is a very important component of our total fee income. So that is why the impact will be bigger.

And also another drag for our total noninterest income is other net interest income. It's a negative growth around 12%. This is mainly affected by the financial markets. Because this year's interest rate trend is different from last year. Last year was a bull market for the debt market. In the first quarter this year, we will see a rebalancing of the interest rate. And second quarter, the short-term interest rate are also higher than last year, even though there is some decline on the long-term interest rate. But this all have negative impact on our other noninterest income. So these are the 2 drag for the first half.

When we look into the second half, we are confident, and as Mr. Wang said, to achieve a steady progress and on the fee-based income, we are confident on that. And for other net noninterest income, I cannot assure you because it's highly related to the market interest rate, especially we are seeing rebalancing of the interest rate very recently. So it's a little bit hard to judge now. So I will pass on to Ms. Wang.

And for your second question about the credit card business, I mean, just now -- recently, the regulator has kind of canceled the ceiling on the credit card loan pricing. This is very new regulation. we think that the overall pricing for credit card loan will be stable, mainly based on the 2 reasons. The first one is our credit card loan is mainly coming from installment payment. And over 20 years involvement, banks have already had quite a mature risk pricing business model for installment business and regulator has also a kind of a mature framework regulating installment, including how banks demonstrate their pricing to consumers.

And also, I think for different customers already have differentiated risk pricing. This time the cancellation of the billing or regulation of credit card pricing doesn't have impact on the installment payment pricing. And also for the revolvement loan pricing and also for the installment pricing, the regulator's guidance is that the price should cover the risk namely to have the risk pricing model and banks can have differentiated pricing to improve their market competitiveness. CMB has always been implementing market regulation, and we have scientific risk pricing mechanism and also risk and pricing management internally. So we think that the overall credit card pricing will be stable.

And just now Mr. Peng said that we have seen some decline on the fee-based income. One of the drag is coming from the credit card business. Even though we are seeing an increase of 43 bp -- percentage point increase in our market share, but due to the decline in the total transaction value, we are seeing a decline on our fee-based income related to credit card. I think credit card is also a focus of the market. I would like to share some of my views on the industry. I think the credit card industry is kind of shifting from a high-growth environment to a high-quality growth. It is facing more risks and also it's seeing consumption degrading and it's kind of a shifting period.

I think it will be quite long lasting. Some of the credit card centers already cannot grow at a normal speed and some are facing very big risk pressure. So it's quite a -- the feature of the transformation period, some will be phased out by the market. But from our view, we think that we are confident in the whole development of the credit card industry because the government is also launching positive measures to stimulate consumption. And credit card is talking a small amount of transaction and it's also both can be a transaction vehicle as well as a vehicle for loans. So it's different from other retail loans.

And also, it could be the line of the credit card line could be revolved and means that the card users can use the card as a settlement vehicle and at the same time to get some credit from the line. And we have a dynamic risk model for credit card and also it's quite a good area to analyze the risk of the retail loans. So we think that credit card will continue to play a pivotal role in the loan consumption industry.

And for CMB, in the credit card business, it's also an important vehicle that we can service our 200 million retail customer. And it also contributes a lot to our total asset size, retail asset size, as well as total operating income. And credit card and debit card are both servicing the customer and providing the transaction and settlement and clearing services to our customer and attracting young people and to help CMB to be the first choice for young people and be one of the reasons that the customers trust us. So I think the credit card business is very important, not only in the past. Also in the future, we will highly emphasize on the credit card business and also lay higher requirement on the development of our credit card business.

Next, please.

Next question is from Guotai Haitong, Mr. [indiscernible].

I'm from Guotai Haitong. I have a question for the internationalization of China Merchants Bank. So it's the first year of CMB's launch of international business strategy. So over half a year, what is your kind of feeling from this kind of international operation strategy? And do you have something to share with us?

Thank you for the question. In order to respond to the low interest rate environment, we have launched the strategy. The first one is to have a faster development in terms of international operation. I think it's following the external trend, namely many Chinese enterprises are going abroad or accelerating their pace to go abroad. So it needs Chinese financial institutions to provide the related services. And secondly, China has become the second largest economy in the world and has been a very integral part of the world's economy, and it's already related to many countries and regions. So CMB's business should also be involved or developed in many areas and regions.

And also with the internationalization of RMB and One Belt, One Road strategy, I think it's the biggest trend in the external environment. So we are following that trend. And secondly, I think in the Chinese market, almost all of the Chinese banking industries are focusing on the Chinese markets and Chinese assets. So when we are facing interest rate coming down, we are both facing NIM contraction. So it's kind of a bottleneck in terms of banking industries.

How we can conquer this bottleneck? I think international operation is a very important key to cure this problem and also help the whole country to build up a strong financial system in the world. All major economies in the world, the financial institutions there are all operational are international and global financial institutions. It will be the same case for Chinese banking industry's future. So that is why this is some active move that we need to take. And for CMB, even though we have achieved sound and stable results. Still, you can see our business focusing on the Chinese market, how we can learn from other international financial institutions and how we can follow the trend of the Chinese enterprises to global and how we can follow the trend of the national strategy. It's important for us to have an international operation.

In Hong Kong, we have the CMB International, and also we have CMB Wing Lung Bank and the international financial markets, we have our overseas branches. We want to leverage our overseas presence to improve our capability to service Chinese enterprises going abroad. And secondly, I think with a deeper cooperation with the global financial institutions, it will also help us to improve our own management and service capability and also learn from other first-class global financial institutions experience to help us to improve our management capability and to improve our service and to nurture our capability to build up our own international team.

So it's not only internationalization of the presence or distribution channel you have, but also it's internationalization of your management level and it's also internationalization of your team. So by doing so, we can better help to service the clients and help us to respond to the low interest rate environment and to have a long-term sustainable development.

So in the first half, yes, it's the strategy we have launched at the beginning of the year. But for the past 2 years, we have already been making efforts in this regard and improve the capability of our overseas branches. And you can see from the asset growth and also from the profitability and also contribution to the bank from the overseas branches, I think they have achieved some results, but I don't think it will be a short-run strategy. It might take a longer term, like 3 to 5 years, to really have the capability to have a global operation. And I do believe there will be a new driving force in the future.

Next question, please.

Next question is from UBS.

I'm Helen from UBS. My question is about the capital management. As we have seen quite a rapid growth of RWA in the second quarter. In the second quarter, a big decline on your core CAR ratio and RWA growth rate is higher than 8%. So the decline on the CAR ratio, I think, may be related to the expansion of your asset book. And I think it's related because we have higher allocation to corporate banking, but the corporate banking business usually have a lower yield compared to retail. So how do you look forward to your CAR ratio and whether the CAR ratio will continue to decline?

This question will be answered by Mr. Peng.

Thank you for your question. The CAR ratio in the first half matter is under the advanced approach or standard approach or our ratio are all declining compared to the end of last year. I think it's related to the dividend payout ratio. If we exclude the factor from the dividend payout, our CAR ratio under the weighted approach, including core Tier 1, Tier 1 and also the total capital ratio under the weighted approach are all increasing compared to the end of last year. Under the advanced approach is still declining compared to the end of last year. So you can see that, firstly, the biggest impact on the CAR ratio is dividend. And excluding the dividend factor, there is a phenomenon that the RWA growth rate is also fast. This is also the second reason why we have seen a decline in the CAR ratio.

And the main reason behind the faster growth of RWA. The first one is that in the first half, especially when we are seeing weaker demand on the retail side, we have more growth from the corporate loans. So the RWA growth on corporate side is faster. And secondly, in June that we have also optimized our rating for model for corporate. So it means that we have a higher proportion on the risk. So that is why you are seeing higher RWA growth rate on corporate side.

And thirdly, for bond investment, this is the same situation that we have allocated more resources to bond investment. So market risk-related RWA is growing faster. But since we have capital strength, so we have some periodic operations, namely for some flow assets like the bill discounting assets and also the LC discounting. Some of the temporary flow assets, we are also adding up them, but it's a temporary reason for the first half.

So because we have the capital strength, we have the capability to do some periodic operations. We have to grow the overall profit. In the long run, I think our strategy is the same and stay firm to retail and to stick to the ROAC goal and to strengthen our capital management. I think that for the whole year, RWA growth rate will be in line with our goal, like 9%. So this is quite the same like in the past that annual growth rate of RWA level will be stable. And for profit for the whole year, it's hard to predict and also because they will be affected by many general environment. So I think excluding all the dividend payout ratios and also excluding the payout ratio for the peripheral bonds and also for the perpetual bonds, we hope that we can continue to maintain a sound and stable CAR level.

Next question is from Goldman Sachs.

I would like to learn from the senior management the insufficient credit demand from the society. What's your view on the demand side of the industry on the corporate side and what industry are having weaker demand than others? What is your guideline of the corporate credit granting? And what is the major growth point in the major industries?

This question will be taken by Mr. Lei.

I should say that since the beginning of this year, the macroeconomic condition under this backdrop, corporate loan has become the major growth driver of all loans for the first half of CMB's corporate loan growth. On a year-on-year base, the growth rate was 7.9%; on the group base, it's 8.04%. It is the trend of the market actually as we feel as what we sense about the demand side of the market in terms of its characteristic, there are several layers.

The first layer is that from CMB's growth itself, manufacturing has a larger demand than other industries, especially those relevant with new technology input and new generation capacities building, including manufacturing, infrastructure and the green area. Well, relatively speaking, for the property and those industries with overcapacity, their demand are relatively weaker. So government-related companies, their demand are also stronger than others. So from other perspectives, our manufacturing, our leasing and commercial service industry, the electricity, heating, power and water production industry, these are the 3 major industries with larger demand.

Just now I have also mentioned about the M&A and restructuring business opportunities. These will become also the industries with stronger demand for the next step. This is also our strategy for the next step's corporate asset origination. We will enhance our capability and further accelerate the growth rate of our general loans. Our target for the first half, we have realized an 8% growth. And for the next step, we aim to secure a growth rate of over 10%.

Thank you, Executive Vice President, Mr. Lei.

We will have the next question. We will have Mr. Ma from the Changjiang Securities to raise his question.

I am Ma Xiangyun from Changjiang Securities. I have a question relevant to a heatedly discussed topic of the deposit migration discussed in the capital market. I would like to understand CMB's view on this phenomenon. So for this round of residents' asset allocation behavior and structure, what changes do you see? And compared with the last round of cycle of wealth management development from 2019 to 2021, what's the changes for CMB's wealth management business arrangement, strategy and your tactic? What is your outlook towards its income growth and also the market competition landscape of the wealth management business?

This question will be taken by Ms. Wang.

Since this year, the retail clients' risk preference are experiencing some changes, but prudent, steady is always the major tune. So under such backdrop, people are having stronger preference on equity products, equity assets. So combining with the recovery of the capital market and the low interest rate environment, we see some improvement in customers' risk preference, but we expect to observe further, combining with the external environment. And under such changes, our wealth management strategy are as follows.

So as a wealth manager, we will do 2 things. One is to grasp the major market trend and the second is to meet customers' demand. So comparatively speaking, from the 2019 to 2021 round of market cycle, the current market environment is something we need to focus on low interest rate environment. It's a future phenomenon, it's a future trend we will be experiencing for a long time. We continue to see the lower rate in the market. We are seeing more true asset yield conveying to our customers. For CMB's clients, we wish that our clients can enjoy comprehensive service within CMB in a long, sustainable, healthy and sound manner. We are also driving ourselves to make efforts in this direction. It is a great test for us.

It is testing us for our capability to provide professional services to our clients, and we will strive to achieve our goal in the 5 following aspects. First, we will seek to provide asset allocation services to our clients under the TREE asset allocation system. We will see through our clients' demand and provide asset allocation suggestion to our clients, during which every round of service we provide to our clients are very professional. But for us, inspect their assets and provide balanced service and suggestions to our clients are very important during the process.

And the second is to better innovate products and provide it to our clients. For CMB, our wealth management platform is a comprehensive supermarket. We have quality selected products. We have customized products. Customers, they have demand in active, in passive funds, in tools, in market, mark-to-market, et cetera. We need to provide different allocations to our clients across their life cycle and to provide very accurate product supply to our clients in a very diversified manner. For instance, you know about the 5-star selection brand, you know, you're quite familiar with. And also, you have the long profit soft products that fit into the category of our product supply.

We believe that customers are having stronger demand in asset allocation. We need to enrich our allocation product line and to ensure that we can have very strong resources in the backward for our clients to make further selection. For instance, we have been enhancing our product supply in the cross-border sector. For instance, the QC, QD, and et cetera, in existing volume and increment of the cross-border products, we all see many growth in this field. The prefixed sale yield of the insurance products, the market interest rates tend to be lower and lower. It is also asking the market players to be back to origin and provide the genuine guarantee type of insurance policies to our clients. We need to see and further dig into the demand of our clients so as to better provide products to our clients accordingly and to solve the problem of why customers should choose insurance policies.

The fifth aspect is to better embed AI into our products. It is a very professional scenario. In wealth management business, we have already embedded AI technology in internal management and customer service. On the customers' end, the AI Xiao Zhao has already provided service to 20 million clients monthly. Combining the latest technology, the AI Xiao Zhao is continuing to emerge and to iterate, combining with different job requirements in different positions, we have embedded AI to help our relationship managers and other colleagues to enhance our efficiency in different business lines. So generally speaking, through huge pressures and the glooming capital market for the past several years, we have seen some silver lining. So for our perspective, we believe the fee income of wealth management business will recover gradually.

Along with the growing of our AUM and the growing of our customer base, these have all formed solid support for the future growth of the fee income of wealth management business. We have also improved the structure of our wealth management fee income. We will continue to increase the ratio of the consultation fee and for the structure of our product mix. We have seen more potential arising from the changes of customers' risk preference. If we continue to see more recovery of the capital market, we will see higher ratio of allocation from our customer into the equity-related products.

Thank you, Ms. Wang Ying. We will have the next question.

We will have the question from [ Mr. Tuan from Ying Fung Capital ].

Congratulations on the positive year-on-year increase of your profitability of the interim report. I have a question. How do CMB balance the interest for short term and long term? And under such backdrop, people are asking for temporary and also long-run return. How do you see the balance between them?

Thank you for your question. I think you're asking about how to balance the short run and long run in terms of the benefit. For a bank's operation, it is highly relevant to every aspect, micro and macro, short and long run, quality and quantity, speed and the growth rate. These are all correlated with each other and influencing every other aspect. So about your question regarding the short run and long run, how do we benefit? I have recalled saying that if you don't have concern for the short run, you will have in the long run. So for us, for CMB, to deal with the relationship between the short run interest and long run interest is the key to our sustainable development and is the goal of our senior management in doing our task.

20 years ago, during the days when President Ma was managing the bank, he has saying that if you don't do retail business, you won't have a living in the future. If you don't do corporate business, you won't live at the time. I think it is very accurately describing the relationship between retail and corporate and also very flexibly describing the relationship between short run and long run.

So for the senior management, we believe it is a question we have to deal with about how do we deal with the current performance and how do we maintain a sustainable development in the future. I think operating a bank is like running marathon. We are not doing a 100-meter sprint. Doing 100-meter sprint is not sustainable. We need to maintain a long term perspective to operate a bank. We operate risk, and risk, it's quite invisible, it is lagging behind, and it is contagious. So we cannot only look at the current performance, the current financial indicators, but neglect the risk in the future. The bank also has a task to support the real economy, to support every household, to support people's livelihood. So we need to walk steady, walk far and to provide better service to our clients based on confidence and based on our credit. We need to win the recognition of the market of our clients so as to better develop.

So for CMB's senior management, as we deal with this relationship, we need to lay solid foundation and look far into the future development. In laying solid foundation, we need to strengthen our foundation, our customer base, our talent base, our management base and our business base. Only with solid foundation can we walk far. At the same time, how do we walk far? How do we look further ahead? We need to strengthen our capability to make sure that we have a clear development goal to do the right thing and not to do something that we think it is unnecessary. So this is how we balance the current development and future development to lay solid foundation and look far ahead and walk far ahead.

And how do we maintain our characteristics and features? So I think the current characteristic should turn into our future sustainable capability. In my perspective, we need to build up the comprehensive development among the 4 major sectors, the retail, the corporate, the investment banking and financial market and also the extensive wealth management.

It is very hard to achieve this goal. but only with a comprehensive development attitude could it support our comprehensive development in the future. And also, we support the 4 initiatives, the internationalization, differentiation, the digital, and the comprehensive cooperation to cope with the low interest rate, low interest spread and the low profitability environment. This is also what we could do to support our future development and the need for our future development.

We also need to realize the regional development strategy such as the Greater Bay Area, the Yangtze River Delta and the Bohai Rim area. These key regions are the regions with quite good economic growth and where the future potential lies. We need to focus on these regions to support our development. In the differentiated and characteristic development, we need to maintain our own strengths and forge our distinctives. As we don't have future concern, we will have some concerns for the current phase. We need to stand in the future to look at our current environment. We will see what we have been doing in a correct way and to avoid making mistakes. We need to look into the future and stand on our footprint and to develop further, stand firmly and seek future development to deal with the relationship between current development and future development and maintain our distinctive competitive edges. So this is my ideas, my views on the question you asked.

To guarantee the rights of all of our shareholders, we have collected many questions from our investors beforehand. Some have already been answered just now. And there are some specific ones we will read out from individuals.

Recently, the bond market has been seeing some turbulence and volatilities. So how CMB's management sees the future trend of the bond interest rate? And what is your investment strategy of your financial market business?

For the financial markets trend, just now when I talk about the income side, I have already touched on upon that. In the first half, we can see there's quite a big volatility in the bond market, like the 10-year treasury bond. The volatile band is around 30 bps. So it means that it will be harder for the investment of the bank. Especially compared to last year, there was a one-way bond market. But this year, it is quite different. Volatility has always been there from first quarter until now, which placed higher requirement on the bank's investment strategy. And very recently, we are seeing a rebalancing of the 10-year treasury bond, again, reaching around 1.8%. For some newly issued bond, it's even higher than 1.8%.

In my view, I think that why the interest rate has rebounded. There are several reasons. The first one is related to the capital market. And capital market is very active, which definitely has led to a rebound in the interest rate in the bond market. And secondly, about the involution policy. Since the attitude of the policy side towards involution, that is why market rate has also risen. And thirdly, I think it might be related to the value-added tax on bond investment or bank's investment into bonds, there will be a recovery of the value-added tax. This also had some impact on that, so which altogether led to a rise of the bond yield in the market. But in the long run, I think the interest rate of the bond market will be trending down, because the PDOC has countercyclical measures and also has adopted loose monetary policy. So in the short run, there will be volatilities.

And the market expectation is that the 10-year bond will be moving from around 1.7% to 1.9%. So our strategy are as follows. The first one is, from the asset allocation perspective, we need to have the appropriate proportion of investment. It's like 30% currently. I think it's an appropriate level. It has risen a little bit, but it's a proper level for us. And secondly, under this asset allocation strategy, we need to buy more when the price is low and the yield is high.

And thirdly, to take the opportunities from the volatilities and have more trading gains. So it depends on our capability of investment. And fourthly, maintain a proper duration because interest rate risk management is also very important of risk management. So duration management should also be proper. And we think that the duration is proper and it should not be lengthened. So this is the duration management. And fifthly, to manage the derivatives to offset the risk. So these are the major risk management measures that we have by all round and also professional investment strategy to help us to maintain absolute yield on our bond investment and to have more trading gains. Thank you.

Next question.

Next question is from Mr. [ Chen Zhou Ching ] from Senior Securities.

My question is about ROE. CMB has high ROE and high dividend ratio. I think this is why many investors invested in CMB. But CMB is now having a more faster decline on ROE. And by the end of June is 13.85%. So if at this speed of decline, whether CMB's ROE will decline below 13%. And if CMB can maintain such a lower growth rate on the asset side, in the next few years, maybe the ROE will decline to around 10%. So in absolute amount, this will be quite a rapid decline. And I remember management has mentioned before that for ROE, it's hard to maintain a higher than 15% ROE. But to maintain a relative ROE advantage compared to large-sized enterprises, I think the management were very confident. My question is that except from this comparative competitiveness, what is your expectation for the ROE level in the next 3 to 5 years?

Thank you for your question. CMB's ROE has been over 15% in the past, at a relatively very high level. Last year was around 14.85%. In the first half, it continued to decline by 1.59 percentage point and now it's around 13.85%. And I know this is a concern for many investors. So the ROE level is dependent on profit growth as well as the growth for equity and also for dividend ratio. These are highly related on that. In the past 2 years, we are seeing a slowing growth on profit side. So this is the reason behind the ROE decrease, and we understand your concern. So from internally, we think that we have set up an internal management mechanism, which is guided by our ROE centered management system.

It means to guide our business to contribute more to ROE to make sure that we have a leading ROE among Chinese banks. Now it's 13.85%. The average level, ROE level is around 9%. So we are around 4% higher than the industry level. We need to maintain our higher than average ROE level. And secondly, we need to also satisfy investors' demand. You need to have a proper return on investment. If there's too low ROE, it means that you don't need to invest in your bank because the opportunity cost is high. So we need to make sure that among the listed companies, we deliver a proper and reasonable return to shareholders and to be a company that is worthwhile for investing in.

So among these objectives, our ROE level, how to balance among the ROE level and how to balance the profit growth and also equity growth as well as dividend payout. We want to -- our goal is to maintain a relatively high ROE level and to be responsible for our investor and to have a proper investment return to our shareholders. This is one goal of our management. And with our efforts, we think that we will continue to have our leading comparative advantage.

And secondly, your question about what is our expectation for the next 3 to 5 years. I think it depends on our profitability, whether we will have a recovery on our profitability. And some investors are asking about whether we can increase the dividend payout ratio. So if you have a higher dividend payout, it means that you can reduce or decelerate the equity growth level. From management's point of view, we think we will take into consideration capital and business strength, business development and external environment as well as regulatory policies and investors suggestions, we will have a comprehensive judgment on that. Thank you.

Thank you, Mr. Wang. Due to time constraint, our 2025 [Audio Gap].

[Statements in English on this transcript were spoken by an interpreter present on the live call.]